Moody’s lifts Zephyr Midco

Moody's Investors Service said it upgraded Zephyr Midco 2 Ltd.'s corporate family rating to B2 from B3 and its probability of default rating to B2-PD from B3-PD.

At the same time, Moody's has affirmed the B2 first-lien backed instrument ratings to the £535 million and €400 million term loan B and the £150 million equivalent senior secured revolving credit facility issued by Zephyr Bidco Ltd.

The outlook remains stable.

On Oct. 5, Zephyr announced that it is seeking consent from its lenders to extend the maturities on its term loan B to 2028 from 2025.

It will be reducing its £180 million of second-lien debt to £70 million, with its maturity extended to 2029 from 2026, using the proceeds of £110 million of cash equity injection from its supportive shareholders.

While the refinancing will be carried out at a higher interest margin, the company will be reducing its outstanding reported debt to £952 million from £1.06 billion as of October.

“As a result of the equity injection and debt reduction, we expect Moody's adjusted gross leverage for ZPG (pro-forma for M&A transactions) to trend to around 6.5x in 2023 versus 8.3x in 2022,” Maria Chiara Caviggioli, assistant vice president and lead analyst on Zepher, said in a news release.

“The company is likely to see meaningful de-leveraging over the next 12-18 months helped by the improved revenue growth prospects although we remain cautious of the difficult macro-economic environment in the United Kingdom.”

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