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Spectrum Brands (SPB 26s; B2 Neg/B/BB Neg) 2Q Earnings (3m ending March)

CONSUMER STAPLES
  • Equities are bid up in US morning on the strong 2Q margins & upgrades to FY24 sales & EBITDA guidance.
  • We are not too positive on the local '26 here - a par call enforced by investors doesn't give as much upside as it once did (BVAL offer side is at €99.6).
  • We'd also caution those eyeing lower cash px $ lines - covenant only requires excess proceeds (net of capex & current debt paydowns) to be used - €425m in the €26's is the cheapest refi for it.
  • Without the par call, longer term fundamentals look weak; the co is still carrying large $1.4b gross debt on its now reduced size - FY24 EBITDA consensus is at $324m (already in line with co's guidance for LDD growth) & FCF is at $75m - those leverage ratios are reflected in current single B ratings.
  • It does have a (long-term) net leverage target of 2-2.5x but that leaves one relying on cash staying on BS - its use of sale proceeds to complete $1b in buybacks despite selling of 1/3 of its business is indic. of debt unfriendly choices on cap. allocation - & on that front how it might avoid covenants through capex is still uncertain.
Earnings from earlier below;
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