Taghleef Industries Holdco Ltd.

The stable outlook on Taghleef reflects our view that the company will continue its solid operating performance during the next 12-24 months, and broadly maintain its production volumes and EBITDA at $100 million-$120 million. The COVID-19 pandemic is likely to be a headwind for many global companies in 2020, however, Taghleef's food packaging and labels end market is fairly resilient, in our view. Additionally, its production facilities are spread across various countries, which helps limit its exposure to supply chain issues. In our base case, we assume broadly stable leverage, with adjusted debt to EBITDA of 3.0x-3.5x and funds from operations (FFO) to debt of 20%-25%. We could lower the rating if the company was less resilient to COVID-19 pandemic

...We expect Taghleef Industries Holdco Ltd.'s (Taghleef's) 2020 earnings will be resilient, supported by the company's exposure to stable packaging end markets. We estimate Taghleef's 2020 EBITDA will be $105 million-$115 million, compared with $114 million in 2019. Despite the negative effect of the COVID-19 pandemic on global consumer demand, we view Taghleef's operating performance as relatively stable given that more than 90% of its packaging production caters to the stable food and beverages end-market segment. Debt leverage has come down, and we expect the gradual deleveraging to continue. Taghleef's S&P Global Ratings-adjusted debt to EBITDA improved to 3.0x at Dec. 31, 2019, from 4.2x on Dec. 31, 2018, as the company successfully integrated the 2019 acquisition of Biofilm and used its positive discretionary cash flow to fully repay the $30 million revolving credit facility (RCF). Management is committed to gradually reducing the company's debt leverage, through positive free operating...

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