S&P turns Triton Water view to stable

S&P said it revised its outlook for Triton Water Holdings Inc. to stable from negative and affirmed its ratings, including the B issue-level rating on the company's first-lien term loan with a 3 recovery rating (50%-70%; rounded estimate: 55%) and the CCC+ issue-level and 6 recovery ratings (0%-10%; rounded estimate: 0%) on its senior unsecured notes.

Triton beat S&P’s forecast for the first half of fiscal 2023. It widened its gross margin by 890 basis points compared to the same prior year period, and the agency said it sees Triton gaining market share in the U.S. bottled water market.

“Absent any leveraging capital markets transaction for M&A or shareholder distributions, we believe leverage will be significantly lower than historical levels post-leveraged buyout. Given the recent margin expansion and roll-off of significant one-time costs related to the separation from Nestle, we estimate that S&P Global Ratings-adjusted EBITDA margin will expand 490 bps in fiscal 2023. At these higher levels of EBITDA, we believe Triton will deleverage to the mid-5x area by year-end,” S&P said in a statement.

However, Triton’s financial sponsors may prevent Triton from lowering its leverage through aggressive financial policies, the agency warned.

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