S&P snips Stitch Acquisition

S&P said it lowered its ratings for Stitch Acquisition Corp. (SVP Worldwide) and its senior secured term loan to B- from B. The recovery rating remains 3, reflecting meaningful recovery (50%-70%; rounded estimate: 50%) in default.

“The downgrade primarily reflects supply chain constraints and our expectation for a material decline in the company's earnings in 2022, which will weaken credit metrics. SVP Worldwide's revenue declined 23% and adjusted EBITDA fell 63% year over year in the fiscal quarter ending March 31. This was primarily driven by product shortages at the start of 2022 caused by Covid-19 pandemic-related plant shutdowns in Vietnam and China during the second half of 2021,” the agency said in a press release.

Lockdowns in Shanghai between March and May are expected to hurt earnings for 2022, S&P said.

“We now project S&P Global Ratings-adjusted leverage will increase above 8x in 2022 compared to our previous expectation of 5.4x,” the agency said.

The outlook is negative.

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