Research Update: Selecta Group B.V. Downgraded To 'B-' On Expected Continued Negative Free Operating Cash Flow; Outlook Negative

COVID-19-related containment measures and office closures in Europe are expected to weigh on vending machine operator Selecta Group B.V.'s (Selecta's) earnings and free operating cash flow (FOCF) generation in fiscal year (FY) ending Dec. 31, 2020. We expect that Selecta will underperform our previous base case and see a significant contraction in revenue and EBITDA, such that FOCF will remain negative in the next two years. As such, we are lowering our long-term issuer credit rating on Selecta to 'B-' from 'B'. We are also lowering our ratings on the group's senior secured notes to 'B-' from 'B', and on the super senior revolving credit facility (RCF) to 'B+' from 'BB-'. The recovery ratings remain unchanged. The negative outlook indicates

...- COVID-19-related containment measures and office closures in Europe are expected to weigh on vending machine operator Selecta Group B.V.'s (Selecta's) earnings and free operating cash flow (FOCF) generation in fiscal year (FY) ending Dec. 31, 2020. - We expect that Selecta will underperform our previous base case and see a significant contraction in revenue and EBITDA, such that FOCF will remain negative in the next two years. - As such, we are lowering our long-term issuer credit rating on Selecta to 'B-' from 'B'. We are also lowering our ratings on the group's senior secured notes to 'B-' from 'B', and on the super senior revolving credit facility (RCF) to 'B+' from '##-'. The recovery ratings remain unchanged. - The negative outlook indicates that the rating could be lowered if the pandemic and related containment measures were to persist and affect Selecta's cash flow and liquidity position beyond our current base case....

Research Update