S&P downgrades Albea

Standard & Poor’s said it lowered to B from B+ the long-term corporate credit rating on Albea Beauty Holdings SA.

The agency also said it assigned a B rating and recovery rating of 4 to the proposed €45 million additional senior secured notes due 2019.

S&P also said it lowered to B from B+ the rating on Albea’s €200 million senior secured notes due 2019 and $385 million senior secured notes due 2019.

The recovery rating on these notes is unchanged at 4, indicating 30% to 50% expected default recovery.

The outlook is stable.

The downgrade reflects an expectation that Albea is unlikely to start generating free cash flow by 2016, given higher working capital needs and management’s higher risk tolerance to securing new contract wins, S&P said.

The group also has proposed a €45 million tap on its existing senior secured notes due 2019. While this transaction is not a significant re-leveraging of the group’s balance sheet, the agency said it considers that the allocation of proceeds is indicative of higher-than-anticipated cash burns over the next 12 to 18 months.

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