Broom Holdings Bidco Ltd.

Overview Key strengths Key risks Strong market position in Ireland, with more than 2.6x and 3.6x the market share of the nearest competitors in waste collection and processing, respectively. Small absolute size compared with larger waste management peers in other countries, and limited geographical diversification with more than half of revenue generated in Ireland. Long-term contracts and low customer churn support revenue visibility and allow for beneficial offtake prices due to steady waste intake volumes. EBITDA margin pressure from the pass through of cost inflation and delays in executing on growth initiatives. High barriers to entry due to significant capital expenditure (capex), regulatory requirements, and multi-year contracts with existing market incumbents. High capex requirements limiting free operating cash flow (FOCF)

...Broom Holdings Bidco Ltd.'s (Beauparc) underperformance versus our base-case assumptions led to weaker credit metrics in 2022, reducing headroom in the rating. At the end of 2022, leverage was at 6.6x, compared with 5.7x the previous year and higher than our forecast of 5.5x- 6.0x. Weaker operating performance during 2022 than we expected led to the increase in leverage. While revenue was about 20 million higher than our forecast, we estimated the S&P Global Ratings-adjusted EBITDA margin at 13.7%, versus our forecast of 16.0%-16.5%. The narrower margin was a result of high-cost inflation that Beauparc was only partially able to pass through, delays in obtaining a license for the Knockharley expansion, and unscheduled closures of offtake sites that increased transportation costs. However, we estimate FOCF at close to breakeven, broadly in line with our previous forecast, because a reduction in growth capex amid tough market conditions offset the lower EBITDA base and higher interest costs....

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