Moody’s downgrades Erickson

Moody’s Investors Service said it downgraded Erickson Inc.’s corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD from B2-PD, senior secured second-lien rating to Caa2 from B3 and speculative grade liquidity rating to SGL-4 from SGL-3.

The outlook is negative.

The downgrades better align the ratings with Erickson’s credit profile based on projected credit metrics and a weak liquidity position, Moody’s said, characterized by negative free cash flow, reliance on its revolver and limited covenant headroom and availability under the company’s revolving credit facility.

The downgrade also reflects the execution risk in the company’s strategy to turnaround its operations from the weak performance sustained following its acquisition of Evergreen Helicopters Inc., the agency said.

Factors such as underestimating the capital needed to improve the operability of the acquired aircraft, quicker than anticipated reductions in demand by U.S. Department of Defense organizations and limited success in expanding the commercial customer base have led to declines in revenues and earnings, weakened liquidity and credit metrics that do not support the B2 rating, Moody’s explained.

The company is expected to continue evaluating its cost structure to become more cost-efficient, the agency added.

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