Moody’s downgrades Resideo

Moody’s Investors Service said it downgraded Resideo Funding Inc.’s corporate family rating to B1 from Ba3, probability of default rating to B1-PD from Ba3-PD, senior unsecured note rating to B3 from B1 and affirmed the Ba2 rating on the company’s first-lien term loans and revolving credit facility. Resideo’s speculative grade liquidity rating of SGL-3 is maintained.

The downgrade reflects Moody’s expectation the company’s ability to improve credit metrics will be hindered by weaker end-market demand caused by the global economic slowdown, the agency said.

“Moody’s expects Resideo’s debt to EBITDA ratio (Moody’s-adjusted) above 5.5x and its EBITA margin below 4.5% in 2020. These metrics are weaker than our previous expectations. In addition to weakness in credit ratios that will persist in 2020, Moody’s also expects negative free cash flow, unless reimbursement payments to Honeywell can be deferred, stemming from weaker operating results,” the agency said in a press release.

The outlook is stable.

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