S&P slashes Enviva

S&P said it lowered its issuer credit rating on Enviva Inc. four notches to CCC- from B. The agency also lowered the issue-level ratings on the senior unsecured debt four notches to CC from B-. The 5 recovery rating on the debt is unchanged.

“The downgrade reflects a deteriorated liquidity position and the likelihood of a distressed debt exchange or default over the next six months. Enviva's third-quarter performance was materially weaker as a result of lower spot market wood pellet pricing compared with the same period last year, elevated expenses, and a slower-than-expected improvement to operational costs. We expect the same factors will result in a similarly weak fourth quarter,” S&P said in a press release.

The agency said it now forecasts 2023 adjusted debt to EBTIDA will be well above 20x compared with its previous expectation of 8.5x-9x.

“Because the company withdrew guidance for adjusted EBITDA for 2023 and beyond, we believe our previous expectations of adjusted debt to EBITDA of 6x-6.5x for 2024 to be overly optimistic. We now forecast 2023 adjusted EBITDA in 2023 will be $80 million-$100 million compared with our previous expectation of $200 million-$225 million. Absent any material improvement in spot prices or the successful renegotiation of certain contracts, we forecast adjusted leverage will be above 10x for 2024,” S&P said.

The outlook is negative.

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