Moody's lowers Zep view to negative

Moody's Investors Service said it changed the outlook on Zep Inc. to negative from stable.

Moody's also said it affirmed Zep's B3 corporate family rating and B3-PD probability of default rating, as well as the B2 ratings on its first-lien senior secured credit facilities and Caa2 rating on its second lien term loan.

The outlook change reflects the risk that the company will be unable to reverse recent operating declines due to difficulty and delays with its restructuring efforts and recent raw material price increases, Moody's said.

The ratings reflect the company's high financial leverage with an adjusted debt-to-EBITDA ratio of 7.5x based on the trailing 12-month period that ended in February 2018, the agency said.

The ratings are constrained by the continued revenue decline in the company's legacy business, exposure to volatile and currently rising raw material costs coupled with an inability to pass on cost increases to customers in a timely manner, Moody's said.

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