Moody’s alters Elior outlook to negative

Moody's Investors Service said it changed Elior Group SA's outlook to negative from ratings under review and confirmed its B2 corporate family rating, its B2-PD probability of default rating and the B2 rating on the backed senior unsecured notes due 2026.

The agency said its assessment of Elior's credit quality does not explicitly consider assets contribution by Derichebourg SA and the added cash flows and potential synergies associated with this transaction.

“Today’s confirmation of the CFR at B2 and the outlook changed to negative reflect Moody's expectations that Elior's free cash flow generation (FCF), on a stand-alone basis, will remain negative in the next 18 months, resulting in a weak liquidity, despite the successful amendment of September 2023 covenant test.

“Although Moody's acknowledges that management is guiding for a positive EBITA in fiscal 2023, ranging between 1.5% and 2% of revenues, supported by 73% of the contracts successfully renegotiated as of Dec. 31, 2022, the rating agency considers that the persistent inflationary environment poses continued risks to profitability improvements in the next 18 months, thus leaving the company with a little headroom to withstand further deterioration in margins,” the agency said in a press release.

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