Aramark Downgraded To 'BB' From 'BB+' On Economic Fallout From Coronavirus, Placed On CreditWatch Negative

  • U.S.-based food concession and uniform services provider Aramark faces dual threats from coronavirus (the virus that causes COVID-19) and the potential for a protracted economic downturn.
  • We are lowering our issuer credit rating on the company to 'BB' from 'BB+'. We are also lowering our rating on the company's senior unsecured notes to 'BB-' from 'BB'. Our 'BBB-' rating on the senior secured bank credit facility is unchanged.
  • All of our ratings on the company have been placed on CreditWatch with negative implications.
  • The CreditWatch placement reflects the potential for a lower rating over the next few months after we assess the near-term and long-term effect of COVID-19 and economic conditions on Aramark's credit metrics and liquidity. However, the possibility of a longer-than-expected CreditWatch exists due to the uncertainty and volatility created by current conditions.
CHICAGO (S&P Global Ratings) March 24, 2020—S&P Global Ratings today took the rating actions listed above. Sales and profits will decline materially over at least the next few quarters. It is likely that many schools, businesses, entertainment venues, and other institutions that provide food concessions or require uniforms for employees will remain closed--at least over the near term--and that additional closures could be announced. An emphasis on social distancing could also result in weaker traffic at facilities serving food concessions away from home, even if the closures are short-lived. Moreover, there will be a substantial rise in joblessness over the near term. While our economists' base case scenario points to a rebound in the second half of calendar year 2020, it is possible the economy will take longer to recover, depressing demand from the company's more economically sensitive customers for its services.
The CreditWatch reflects the potential for a downgrade over the next few months. However, given the uncertainty around the duration of the outbreak, including the potential for it to reoccur after the summer, the ratings could remain on CreditWatch for a longer-than-normal period. We expect to resolve the CreditWatch placement after we assess the severity and duration of the economic impact of COVID-19 on Aramark's credit metrics and long-term liquidity outlook.
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