Moody’s slashes Enviva

Moody's Investors Service said it downgraded Enviva Inc.'s corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD from B2-PD and senior unsecured notes due 2026 to Caa2 from B3. Moody’s also trimmed the speculative grade liquidity rating to SGL-4 from SGL-3. The agency also placed the ratings under review for further downgrade. Previously, the outlook was stable.

“Governance was a key driver of this rating action, reflecting the lack of transparency with regard to business practices of the prior management regarding the extent of trading in wood pellets beyond the supply of wood pellets under long-term take or pay contracts. These practices indicate a higher level of risk in the business profile than was incorporated into the prior ratings,” Moody’s said in a press release.

The agency added, “The downgrade also reflects weak liquidity due to a likely breach of covenants under the credit agreement in the fourth quarter of 2023 unless the company negotiates waivers with its lenders. In addition, the company faces a significant financial liability and losses on a series of supply and purchase agreements with one of its customers that it entered into in the fourth quarter of 2022.”

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