S&P cuts Reynolds Consumer

S&P said it lowered its ratings for Reynolds Consumer Products Inc. to BB from BB+ and its senior secured credit facilities to BB+ from BBB-. The recovery rating remains 2, indicating substantial (70%-90%; rounded estimate: 80%) recovery in default.

Reynolds. reported weaker-than-expected fourth-quarter fiscal 2022 financial results and guidance for 2023, leading to the downgrade, the agency said.

“As a result, we no longer believe the company will strengthen credit metrics in fiscal 2023 consistent with our prior expectations, which included reducing adjusted leverage to below 3x. We now forecast leverage to remain above 3x in 2023,” S&P said in a press release.

The agency said it does project Reynolds’ cash flow will improve in 2023. “We project Reynolds will generate operating cash flow of approximately $480 million, supported by reduced working capital investment and higher earnings. After capital expenditure (capex) of about $130 million and dividends of $190 million, we estimate the company will generate about $160 million in discretionary cash flow (DCF). While not included in our forecast, Reynolds could prepay a portion of its term loan debt, which it has done in the past.”

The outlook is stable.

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