Moody’s cuts Eagle Intermediate

Moody’s Investors Service said it downgraded Eagle Intermediate Global Holding BV’s (d/b/a Lycra Co.) corporate family rating to B3 from B1. Moody’s also downgraded Lycra Co.’s secured notes to B3 from B1, probability of default rating to B3-PD from B1-PD and speculative grade liquidity rating to SGL-4 from SGL-2. The rating outlook remains negative.

“The rating downgrade reflects Lycra Co.’s recent earnings weakness, increased debt leverage, as well as risks associated with the deteriorating credit quality of its majority owner, Shandong Ruyi Technology Group Co., Ltd. (Caa1 negative). The slowing demand in China, low generic spandex prices and a strong dollar will continue to weigh on its earnings and partly offset the benefits of lower raw material costs, business restructuring and contribution from its Taiwan acquisition in 2020. Shandong Ruyi’s lingering refinancing risk will also have a negative impact on the Lycra Co.’s execution of its business plan and increase the uncertainty of the Lycra Co.’s ownership over time,” Moody’s said in a press release.

Moody’s noted Lycra Co.’s credit metrics have recently weakened to the level comparable to that of low-single-B rated credits. Its adjusted debt/EBITDA rose to high seven times at the end of September up from 5.5x at the end of 2018, after reporting an almost 10% decline in sales and EBITDA margin falling to 13% in the first nine months of the year from 18% a year ago.

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