S&P rates Ekaterra, loan B-

S&P said it assigned Cuppa Bidco BV, the parent of Ekaterra or the group, and its planned senior secured €2,083 million term loan B due 2029. The outlook is stable.

CVC Capital Partners bought Unilever's global tea business Ekaterra, excluding its operations in India, Indonesia and Nepal, as well as the ready-to-drink business, for about €4.5 billion on a cash-free, debt-free basis.

“According to management, the group is on track to separate from Unilever by third quarter 2023. The overall separation process started in late 2021, and management expects the total one-off spending over the next two-to-three years to be close to €324 million. Considering the global presence of Ekaterra and Unilever, we see risks arising in the process of segregating operational activities, processes, and information technology (IT) systems. We expect that these risks will be mitigated to a large extent by the transitional service agreement (TSA) with Unilever,” S&P said in a press release.

The agency said it forecasts Ekaterra's S&P Global Ratings-adjusted debt to EBITDA to reach 8.7x at the end of 2022 and peak at around 8.8x in 2023.

“Our stable outlook indicates that we expect Ekaterra will manage execution risks associated with its separation from Unilever and achieve modest revenue growth, while gradually improving its margins” S&P said.

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