Research Update: IT Service Provider Centurion Newco (Engineering) 'B-' Ratings Affirmed; Outlook Negative

Centurion Newco SpA (Engineering) is refinancing its maturing €605 million senior secured notes and €38 million term loan B with a new €650 million bond, and extending the maturities of its revolving credit facility (RCF) and payment-in-kind (PIK) facilities. Although the proposed refinancing will increase the company's interest burden because of higher rate, we expected Engineering's free operating cash flow (FOCF) after leases will turn positive and steadily increase from 2025 following two consecutive years of cash burn, with early signs of improvement in 2024. This is supported by our expectation of better control on the company's exceptional costs, improving operating efficiency, and lower capital expenditure (capex). We therefore affirmed our 'B-' long term issuer credit rating on Engineering, and

...- Centurion Newco SpA (Engineering) is refinancing its maturing 605 million senior secured notes and 38 million term loan B with a new 650 million bond, and extending the maturities of its revolving credit facility (RCF) and payment-in-kind (PIK) facilities. - Although the proposed refinancing will increase the company's interest burden because of higher rate, we expected Engineering's free operating cash flow (FOCF) after leases will turn positive and steadily increase from 2025 following two consecutive years of cash burn, with early signs of improvement in 2024. - This is supported by our expectation of better control on the company's exceptional costs, improving operating efficiency, and lower capital expenditure (capex). - We therefore affirmed our 'B-' long term issuer credit rating on Engineering, and assigned our 'B-' issue rating to the proposed bond. - The negative outlook reflects our view that Engineering has limited rating headroom for any operational setbacks and a relatively...

Research Update