Research Update: Austrian Distributed Power Provider INNIO Group Holding GmbH Rating Lowered To 'B-'; Outlook Stable

We believe INNIO, which generated €211 million reported EBITDA in 2019, will post weaker operating results in 2020 and 2021 due to lower demand at its Waukesha branch and because of COVID-19 disruptions, while recovery prospects for 2021 are still uncertain. We anticipate organic revenue decline in 2020, resulting in negative free operating cash flow (FOCF) generation and weaker credit metrics. We are therefore lowering our rating on INNIO to 'B-'. We are also lowering the issue ratings on the senior secured debt to 'B-' with recovery prospects of '3' (55% rounded estimate), and our issue ratings on the second-lien secured debt to 'CCC' with a recovery rating of '6' (0% rounded estimate). The stable outlook reflects our expectation that

...- We believe INNIO, which generated 211 million reported EBITDA in 2019, will post weaker operating results in 2020 and 2021 due to lower demand at its Waukesha branch and because of COVID-19 disruptions, while recovery prospects for 2021 are still uncertain. - We anticipate organic revenue decline in 2020, resulting in negative free operating cash flow (FOCF) generation and weaker credit metrics. - We are therefore lowering our rating on INNIO to 'B-'. - We are also lowering the issue ratings on the senior secured debt to 'B-' with recovery prospects of '3' (55% rounded estimate), and our issue ratings on the second-lien secured debt to '###' with a recovery rating of '6' (0% rounded estimate). - The stable outlook reflects our expectation that the company's performance will start to recover in 2021. We will see profitability improvements based on increasing volumes and a reduction in restructuring costs. We expect INNIO to return to positive FOCF and maintain comfortable liquidity position...

Research Update