Moody's downgrades ASP Navigate

Moody's Investors Service said it downgraded ASP Navigate Acquisition Corp.’s ratings, including the corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD and the senior secured first-lien credit facilities to B3 from B2.

“The rating downgrades reflect Moody's expectation for debt/EBITDA (on Moody's adjusted basis) to remain at or above 5.5x through 2023, as well Moody's expectation that the company will not generate positive free cash flow in FY2022. While ASP is attempting to raise prices on its OEM medical device customer base to offset input cost inflation, and volume trends continue to trend positively in the orthopedic end-market, Moody's expects a persistent inflationary environment to continue to negatively impact profitability in FY2022, slowing the pace of earnings growth and deleveraging,” the agency said in a press release.

Moody’s said it estimates ASP’s debt/EBITDA at 6.2x at the end of 2022, and 5.8x at the end of 2023. “The company has secured a strong pipeline of new business wins, which requires elevated near-term investment in capital spend and working capital that Moody's expects will inhibit positive free cash flow generation in FY2022. Further, the rising interest rate environment also presents a headwind to free cash flow generation, given the company's debt capital structure is concentrated in floating-rate term loan instruments,” Moody’s added.

The outlook is stable.

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