Aramark

The negative outlook reflects Aramark's continued weak, albeit improving, credit ratios that are a result of the large, debt-financed acquisitions that occurred in late 2017 and early 2018. We could lower the rating if Aramark is unable to further improve credit ratios, possibly due to acquisition integration problems or a weakening economy. We could revise the outlook to stable over the next year if Aramark successfully integrates the Avendra and AmeriPride acquisitions and strengthens credit metrics, including improving adjusted debt to EBITDA closer to 4x with a clear path to deleveraging below 4x through a combination of EBITDA growth and debt reduction. An outlook revision to stable would also require our continued belief that the company is committed to its

...We will continue to monitor the activist investor Mantle Ridge's plan for changes and will reassess our ratings if the changes result in further leveraging of the balance sheet. Activist investor Mantle Ridge disclosed its 20% economic stake in Aramark in August of 2019. Subsequently in October, the company announced a new CEO and appointed five new members to its board including the founder and CEO of Mantle Ridge, with four existing board members departing. We could lower our rating in the future if the changes that Mantle Ridge pushes for will result in further leveraging of the balance sheet. However, Mantle's direct stock ownership (excluding derivatives) is less than 10%, which could constrain its bargaining power, and potential changes may be limited to non-balance-sheet leveraging items. Given that Aramark is still in the process of improving its aggressively leveraged balance sheet following meaningful acquisition activity over the past two years, S&P Global Ratings assumes its...

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