S&P lowers Rentokil view to negative

Standard & Poor's said it revised to negative from stable the outlook on Rentokil Initial plc and related entity, Rentokil Initial 1927 plc.

The agency also said it affirmed a BBB long-term and A-2 short-term corporate credit ratings on Rentokil and Rentokil Initial 1927.

S&P also said it affirmed the BBB ratings on Rentokil's senior unsecured notes.

The outlook revision reflects a view that, following news of the fully debt-financed acquisition of Steritech group, there is a one-in-three possibility that Rentokil's credit metrics will not improve sufficiently over the next two years to be commensurate with the current rating, the agency said.

S&P said it expects the company’s funds from operations-to-debt to approach 35% and free operating cash flow-to-debt will be about 15% to 20% within two years.

The acquisition is expected to slightly enhance Rentokil's business risk profile by strengthening its market position in the U.S pest control business and improve the group's geographic profile, the agency said.

But the acquisition is considered too small to change the company’s current assessment because Steritech will represent only about 7% of Rentokil's sales, S&P said.

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