Moody's assigns B3 to Ecotone

Moody's Investors Service said it assigned a first-time B3 corporate family rating and a B3-PD probability of default rating to Ecotone HoldCo III SAS. Concurrently, Moody's gave a B3 senior secured rating to the €490 million guaranteed first-lien senior secured term loan, upsized from €390 million via a €100 million fungible add-on, and to the €75 million guaranteed first-lien senior secured revolving credit facility, both due in 2026 and borrowed by Ecotone. The outlook is stable.

About €100 million of the term loan with an €85 million PIK instrument borrowed by an entity outside of the restricted group, which Moody's said it does not consider in calculating the company's debt, and around €11 million from the company's cash balances will be used to finance a shareholder distribution of around €190 million via a partial redemption of preference shares and the associated transaction fees.

"Ecotone's B3 rating balances the company's sound market positions, particularly in France, the strong fundamentals of the European organic and healthy food market, the company's flexible cost structure and our expectation of healthy free cash flow generation, with the company's niche business focus, its low operating margins compared to peers, degree of exposure to potential input price inflation and high financial leverage," said Paolo Leschiutta, a Moody's senior vice president and lead analyst for Ecotone, in a press release.

"We expect Ecotone to gradually delever towards 6x by 2023 from 7.5x today, supported by positive organic growth and operating margin expansion," added Leschiutta.

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