Research Update: Osmosis Holdings L.P. 'B' Issuer Credit Rating Affirmed; Outlook Stable; Incremental Term Loan Rated 'B' (Recovery: '3')

Global water treatment and service provider Osmosis Holdings L.P. (doing business as Culligan) intends to raise a $950 million incremental first-lien term loan to partly fund its planned acquisition of the continental Europe assets of Primo Water Corp., repay its outstanding revolver borrowings, and add excess cash to its balance sheet. We estimate pro forma pre-synergy leverage at transaction close will be in the low-8x area (including preferred equity as debt) and expect the company will deleverage to the low-7x area in 2024 as it executes acquisition synergies and laps certain one-time charges. We also expect free cash flow to be pressured in 2023 and 2024, but that EBITDA cash interest coverage will be sustained above 2x. We affirmed our

...- Global water treatment and service provider Osmosis Holdings L.P. (doing business as Culligan) intends to raise a $950 million incremental first-lien term loan to partly fund its planned acquisition of the continental Europe assets of Primo Water Corp., repay its outstanding revolver borrowings, and add excess cash to its balance sheet. - We estimate pro forma pre-synergy leverage at transaction close will be in the low-8x area (including preferred equity as debt) and expect the company will deleverage to the low-7x area in 2024 as it executes acquisition synergies and laps certain one-time charges. We also expect free cash flow to be pressured in 2023 and 2024, but that EBITDA cash interest coverage will be sustained above 2x. - We affirmed our 'B' issuer credit rating on Osmosis and 'B' issue-level ratings on its senior secured credit facilities. We also assigned a 'B' issue-level rating to AI Aqua Merger Sub Inc.'s proposed $950 million incremental term loan. The recovery rating is...

Research Update