Research Update: Pfleiderer Group B.V.&Co. KG Downgraded To 'CCC' On Likely Distressed Transaction; Ratings On CreditWatch Negative

We expect Germany-based wood panel manufacturer Pfleiderer Group B.V.&Co. KG (Pfleiderer)'s free operating cash flow (FOCF) will remain negative in 2024 because demand from the home renovation and new construction markets remains subdued. We consider Pfleiderer's level of FOCF generation as weak and insufficient for its debt burden, and therefore view its capital structure as unsustainable. Given this, and the recent proposal submitted to creditors, we think that a distressed transaction is likely in the next 12 months. We therefore downgraded Pfleiderer to 'CCC' from 'B'. We are also lowering our issue ratings on the senior secured debt to 'CCC' from 'B'. We placed the ratings on CreditWatch with negative implications, which indicates that there is a one-in-two

...- We expect Germany-based wood panel manufacturer Pfleiderer Group B.V. & Co. KG (Pfleiderer)'s free operating cash flow (FOCF) will remain negative in 2024 because demand from the home renovation and new construction markets remains subdued. We consider Pfleiderer's level of FOCF generation as weak and insufficient for its debt burden, and therefore view its capital structure as unsustainable. - Given this, and the recent proposal submitted to creditors, we think that a distressed transaction is likely in the next 12 months. - We therefore downgraded Pfleiderer to '###' from 'B'. We are also lowering our issue ratings on the senior secured debt to '###' from 'B'. - We placed the ratings on CreditWatch with negative implications, which indicates that there is a one-in-two likelihood that we could lower the ratings in the next three months if the company and its creditors agreed to a restructuring which we consider distressed....

Research Update