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Spectrum Brands (SPB; B2/B+/BB Neg) Moody's off neg.

CONSUMER CYCLICALS
  • Moody's off negative outlook. As we mentioned the business sale proceeds by covenant requirements is forcing co to tender out $1.2b in debt (it otherwise had to use it in investments or M&A within 1yr/June).
  • We are still uncertain if it will revisit our markets after the single 26s are taken out - even including the private $300m issuance two weeks ago headroom there to leverage targets (net will fall towards 0). Moody's echoing that, anticipating gross leverage (adj.) to fall from 4.4x at the end of March to 2x before rising to 2.5x-3 on a lift into target range (co stated 2-2.5x) on acquisitions & other investments.
  • Not much confidence from raters on the co, deleveraging (forced) still leaving it in single B territory, Moody's adding "uncertainty around long-term business profile and risk, capital structure and free cash flow generation".
  • As we've noted in the past not a credit friendly name; it sold the Hardware & Home business (36% of sales at the time) to {ASSAB SS Equity} for $3.6b in net proceeds & directed $1b of that to buybacks.
  • It has also tabled "a sale, JV or spin" of the Home & Personal Care business "later this year" - it makes up ~40% of revenues & 15% of EBTIDA. Another credit negative.
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