S&P cuts Zep

S&P said it lowered its ratings on Zep Inc. and its secured cash flow revolver and first-lien term loan to CCC+ from B- and the rating on its secured second-lien term loan to CCC- from CCC. The 3 (rounded estimate: 60%) recovery rating on the cash flow revolver and first-lien term loan and 6 (rounded estimate: 0%) recovery rating on the secured second-lien term loan are unchanged.

“The downgrade reflects Zep's weakening leverage, expected negative free cash flow generation this year, and our view that the risk of a default scenario has increased over the next 12 months. The company reported weaker product demand than we previously expected, which caused its performance to fall short of our recent estimates,” S&P said in a press release.

The decrease largely reflected the decline in biosecurity product sales, as customers across consumer, industrial and food and beverage end markets scaled back their usage and inventory levels to a normalized level following the national roll out of Covid-19 vaccines, the agency said.

The outlook is negative.

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