Moody's lowers Constellis view to negative

Moody's Investors Service said it changed the outlook of Constellis Holdings, LLC to negative from positive and affirmed all of the ratings, including the corporate family rating of B3.

The outlook revision reflects the company's unexpectedly large operating cash flow deficit in the fourth quarter of 2018 with expectation that improved cash flow will likely not develop until mid-2019, Moody's said, and risk that the deficit could continue beyond mid-2019.

The ratings incorporate the issuance of a $100 million senior secured term loan in December 2018 thereby strengthening the liquidity profile, now deemed adequate for the next 12 months, the agency said.

The proceeds were used to fund up-front costs associated with new contract wins and to add cash to the balance sheet, Moody's said.

The extra cash provided flexibility to conclude remaining business integration and process enhancement activity following several acquisitions over 2017, the agency said.

The ratings also consider that the company's executive management has largely been replaced in 2018 and the new team's focus on strengthening business practices of the company could yield long-term benefits, Moody's said.

The company's ability to utilize its capabilities and scale opportunistically, operate seamlessly across the organization, execute contracts and manage working capital will depend on quality of the business integration effort, a process now ongoing over several years through different management teams, the agency said.

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