Crosby Worldwide Ltd. Outlook Revised to Negative Given End Market Decline and Expected High Leverage; Ratings Affirmed

  • We believe Crosby Worldwide Ltd.'s significant (over 20%) exposure to oil and gas and other cyclical end markets will materially constrict revenues and margins and increase its adjusted debt-to-EBITDA ratio well above our original expectation of 6.5x.
  • Therefore, we are revising Crosby's outlook to negative from positive and affirming our 'B-' issuer credit rating.
  • At the same time, we are affirming our 'B-' rating and '3' recovery rating on company's revolving credit facility due 2024 and first-lien term loan due 2026 as well as our 'CCC' and '6' recovery rating on the second-lien term loan.
  • The negative outlook reflects our expectation that we could lower our ratings if Crosby's leverage remains above 6.5x over the next 12 months. We expect weaker operating performance as key end-markets will remain depressed, which may limit the company's ability to generate positive free cash flow and high debt leverage that could be unsustainable.
NEW YORK (S&P Global Ratings) March 23, 2020--S&P Global Ratings today took the rating actions listed above.
The outlook revision incorporates significant declines in its end markets (particularly its oil and gas and other cyclical markets) and uncertainty in the general macroeconomic environment given the rapid spread of COVID-19 and expectations for a sizable reduction in global GDP. We expect leverage well above 6.5x in 2020, possibly approaching 10x, and for cash flow to be significantly impacted.
The negative outlook reflects the potential that we could lower the rating if Crosby experiences significantly lower revenues and free cash flow over the next 12 months, particularly given Crosby's material exposure to the upstream oil and gas end market.

Downside scenario

We could lower our rating on Crosby if the company's free operating cash flow turns negative and its liquidity position weakens. We believe negative cash flow could also lead to increased revolver usage, which would subject the company to financial maintenance covenants and reduce its cushion under these covenants. Additionally, we could lower our rating if we deem the capital structure to be unsustainable.

Upside scenario


We could revise our outlook to stable if there is a dramatic rebound in the company's end markets and we expect operating trends to be restored to levels supporting sustainable positive free cash flow, sufficient liquidity and a sustainable capital structure.
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