Research Update: Leather S.p.A., Parent Of Auto Leather Producer Pasubio, Assigned 'B' Preliminary Rating; Outlook Stable

Italy-headquartered Leather S.p.A. (doing business as Pasubio) is a niche auto supplier focused on high-quality leather for passenger car seating and interiors, benefiting from exposure to the premium and luxury car segments and high S&P Global Ratings-adjusted EBITDA margins of 17%-22% in 2019-2022. Private equity firm PAI Partners is acquiring the business from CVC Capital in a leveraged buyout (LBO) transaction. We expect this will increase Pasubio's adjusted debt to EBITDA to about 5.5x in 2021 from 2.5x in 2020, with a progressive reduction toward 5x in 2022. At the same time, we anticipate the company will sustain free operating cash flow (FOCF) of €20 million-€30 million annually in 2021–2022, supported by earnings and modest capital expenditure (capex) requirements. We

...- Italy-headquartered Leather S.p.A. (doing business as Pasubio) is a niche auto supplier focused on high-quality leather for passenger car seating and interiors, benefiting from exposure to the premium and luxury car segments and high S&P Global Ratings-adjusted EBITDA margins of 17%-22% in 2019-2022. - Private equity firm PAI Partners is acquiring the business from CVC Capital in a leveraged buyout (LBO) transaction. We expect this will increase Pasubio's adjusted debt to EBITDA to about 5.5x in 2021 from 2.5x in 2020, with a progressive reduction toward 5x in 2022. - At the same time, we anticipate the company will sustain free operating cash flow (FOCF) of 20 million-30 million annually in 2021¡2022, supported by earnings and modest capital expenditure (capex) requirements. - We therefore assigned our 'B' preliminary issuer credit and issue ratings to Pasubio and its proposed senior secured notes, respectively. - The stable outlook reflects our expectation that the company will maintain...

Research Update