S&P cuts AM General

S&P said it trimmed its ratings on PM General Purchaser LLC (AM General) and its $600 million of senior secured notes. The agency revised the notes’ recovery rating to 4 from 3.

“We expect AM General's revenue to drop 20%-30% in 2021 because of order delays from foreign customers due to the impact of the Covid-19 pandemic on defense budgets and shifting near-term spending priorities from the U.S. military. This pushes out new Humvee deliveries and leaves only essential maintenance being performed,” S&P said in a press release.

“The downgrade reflects our expectation that leverage will remain above 5x throughout our forecast. We expect significant declines in revenue to result in EBITDA and cash flow well below our previous forecast. Thus, we expect much weaker credit ratios. We expect debt to EBITDA to be 7.7x-8.1x in 2021 and 6.7x-7.1x in 2022 compared to our previous expectations of about 4x-4.5x,” the agency added.

The outlook is negative.

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