Moody's cuts Heidelberger, view to negative

Moody's Investors Service said it downgraded the corporate family rating of Heidelberger Druckmaschinen AG to Caa1 from B3, the probability of default rating to Caa1-PD from B3-PD and the rating of outstanding €150 million senior unsecured notes due 2022 to Caa2 from Caa1. The outlook was changed to negative from stable.

Moody's said its decision to downgrade Heidelberger's ratings to Caa1 with a negative outlook reflects a further decline in operating performance and rise in financial leverage, as evidenced in the company's profit warning from Jan. 20. Based on the lowered guidance, credit metrics as of March 31, 2020 will be considerably weaker than previously expected and do not meet requirements for a B3 rating anymore.

The downgrade also reflects the weakened liquidity profile following ongoing negative free cash flow generation. Heidelberger's capital structure is highly reliant on ongoing access to the company's revolver of €320 million, a significant part has been drawn at Dec. 31 and Moody's expects the revolver’s covenant headroom to further tighten over the next quarters. Further pressure could arise when the company will have to repay its € 150 million senior unsecured notes in May 2022, if challenging market conditions continue to burden Heidelberger's performance, the agency said.

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