Vertiv Group Corp.

We believe the company has good prospects to strengthen its credit measures over the next couple of years given its operational improvements, which we expect to materialize more meaningfully; the rolloff of previously incurred costs pertaining to the digital initiative; and the solid backlog that will support some credit metrics improvement. In our base case, we expect Vertiv's leverage ratio to ease to the low-6x area over the next 12 months. The company could also organically expand over 5% in 2019. However, there is a 1-in-3 chance that the credit measures may not improve to that extent because of macro-related uncertainties and the potential for unfavorable changes in product mix, market share, or operating costs. We believe solid profitability is

...The negative rating outlook reflects the company's elevated leverage profile.Vertiv Group Corp. has high leverage, with an adjusted-debt-to-EBITDA ratio exceeding 9x on a trailing-12-months basis as of June 30, 2019. It was 7x on an annualized basis of second-quarter earnings. Free cash flow is also weak, at negative $81 million for the 12 months ended June 30, 2019, though it improved from negative $343 million at the same point last year. We believe the company has good prospects to strengthen its credit measures over the next couple of years given its operational improvements, which we expect to materialize more meaningfully; the rolloff of previously incurred costs pertaining to the digital initiative; and the solid backlog that will support some credit metrics improvement. In our base case, we expect Vertiv's leverage ratio to ease to the low-6x area over the next 12 months. The company could also organically expand over 5% in 2019. However, there is a 1-in-3 chance that the credit...

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