S&P prunes Pretium

S&P said it lowered its ratings for Pretium Packaging LLC (Poseidon Investment Intermediate LP) and its first-lien term loan to CCC+ from B- and its second-lien term loan rating to CCC- from CCC. The recovery ratings are unchanged.

“The downgrade reflects Poseidon's reduced liquidity and risk of sustained negative free operating cash flow (FOCF).Its weaker-than-expected EBITDA, higher cash interest costs, and ongoing growth capital expenditure (capex) resulted in a meaningful cash flow deficit in the fiscal first quarter. With only $6.3 million of cash at the beginning of the fiscal year, the company mainly funded the shortfall in the fiscal first quarter with $19 million of borrowings under its $100 million asset-based lending (ABL) facility and $11 million of proceeds from an equipment sale-leaseback transaction,” S&P said in a press release.

Positively, Poseidon’s debt maturity profile somewhat eases its refinancing risk. The company refinanced its capital structure with the fiscal 2022 acquisitions of Alpha Packaging and Grupo Edid. It has no debt maturities until its ABL facility is due in October 2026. The first-lien term loan is due October 2028, and the second-lien term loan is due October 2029.

The outlook remains negative.

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