Research Update: CAE Inc. Outlook Revised To Negative On Slower Deleveraging Following Acquisition Of SIMCOM; 'BBB-' Ratings Affirmed

Canada-based CAE Inc. announced that it had entered into an agreement to acquire most of the remaining ownership stake of its business aviation training joint venture partner, SimCom Holdings Inc. (Simcom; not rated). The proposed transaction includes a purchase price of about US$230 million and the assumption of about US$100 million of existing debt. We expect it will add about C$450 million to adjusted debt and modest EBITDA beyond fiscal 2025 (fiscal year ends March 31) at a time when leverage is already above our downside threshold for the rating. We now expect pro forma S&P Global Ratings-adjusted debt to EBITDA to be about 3.7x in fiscal 2025 and decline to about 3x by fiscal 2027 (about a year later

...- Canada-based CAE Inc. announced that it had entered into an agreement to acquire most of the remaining ownership stake of its business aviation training joint venture partner, SimCom Holdings Inc. (Simcom; not rated). - The proposed transaction includes a purchase price of about US$230 million and the assumption of about US$100 million of existing debt. We expect it will add about C$450 million to adjusted debt and modest EBITDA beyond fiscal 2025 (fiscal year ends March 31) at a time when leverage is already above our downside threshold for the rating. - We now expect pro forma S&P Global Ratings-adjusted debt to EBITDA to be about 3.7x in fiscal 2025 and decline to about 3x by fiscal 2027 (about a year later than we previously assumed). - As a result, we revised our outlook to negative from stable. At the same time, we affirmed all our ratings on the company, including our '###-' issuer-credit rating. - The negative outlook reflects our expectation that adjusted debt to EBITDA will...

Research Update