Covanta Holding Corp.

We forecast credit metrics to further improve in 2022 with debt to EBITDA of 5.5x–6x. Covanta has four projects under construction in the U.K., one of which, Rookery, is expected to reach commercial operation in the first half of 2022. The project will generate an adjusted EBITDA of about $30 million, which will contribute to improving metrics in 2022 and 2023. Of the others, Newhurst and Earls Gate are expected to be operational in 2023 and Protos is expected to be operational in 2024. The stable outlook on Covanta reflects our view that leverage will decline to about 6x in 2021 and to the mid- to high-5x area in 2022. Factors that could lead to a downgrade would likely involve

...We evaluate Covanta Holding Corp. on its current asset base, although the company may look very different following its strategic review and implementing any plan. In October 2020, Covanta announced the launch of a comprehensive strategic review of its operations, growth priorities, and capital structure. Although the review is ongoing and the company has not yet announced its strategic plan, we expect at least some asset sales later in the year that would involve an accompanying repayment of debt. We expect after implementing the results of its review, Covanta will be materially leaner, albeit smaller. However, as Covanta's intentions are unknown, we continue to base our forecast on Covanta's current operations and capital structure and do not assume any asset sales, restructurings, debt repayment, etc., in our credit measures. We plan to reassess our credit rating on Covanta following the review. We expect Covanta's credit metrics to remain elevated in 2021, with modest improvements extending...

Full Report