Research: Rating Action: Moody’s Raises WireCo’s CFR to B1; stable outlook

Outstanding approximately $535 million of assigned rated debt

New York, August 17, 2022 — Moody’s Investors Service (“Moody’s”) has raised the Family of Companies (CFR) rating of WireCo WorldGroup Inc. (“WireCo”) from B1 to B2 and the likelihood rating from default (PDR) to B1-PD from B2-PD. Moody’s also upgraded the company’s senior secured term loan from B1 to B2. The rating outlook is stable.

The upgrade reflects WireCo’s efforts over the past few years to improve its product lineup by moving away from low-margin products and gradually moving away from volatile energy markets, which have historically weighed on earnings. business during downturns. The upgrade also takes into account the company’s track record of passing on rising input costs driven by steel through improved pricing strategy, processes and controls around price negotiations and the inclusion of the surcharge mechanism in the contracts, which have also improved its margins in recent quarters. WireCo also managed its cost base more effectively, with significant cost reductions and targeted investments for strategic initiatives.

“We also expect WireCo’s tighter working capital controls to help ensure positive free cash flow in the years to come,” said Motoki Yanase, vice president and senior credit manager at Moody’s.

“The stable outlook reflects our view that these efforts have improved WireCo’s fundamental profitability and cash flow generation, and positioned the company to better withstand the cyclicality of some of its end markets,” added Yanase.

Updates :

..Issuer: WireCo WorldGroup Inc.

….LT corporate family rating, upgrade from B1 to B2

….Default scoring probability, upgrade to B1-PD from B2-PD

….Secure Senior Bank Credit Facility, Upgrade from B1 (LGD4) to B2 (LGD4)

Outlook Actions:

..Issuer: WireCo WorldGroup Inc.

….Outlook remains stable

RATINGS RATIONALE

The B1 rating from WireCo’s family of companies reflects the company’s strong niche in cable products, including steel cables, synthetic cables and plastic moldings and sheets in global markets. The rating further reflects WireCo’s diverse end markets to various user industries, its geographic diversification in the United States, Europe, South America and Asia, and strong demand in its end markets, including steel cables. critical used on cranes and other industrial applications and synthetic ropes used in the fishing, marine and offshore, oil and gas and renewable energy markets. Moody’s also acknowledges WireCo’s improved profitability in recent years, which has been achieved through the recovery in demand associated with the company’s efforts to invest in high-margin products and exit low-margin products. ; transform its pricing strategy, processes and controls resulting in price increases above inflation; and manage its cost base.

These credit strengths are offset by the cyclicality of some of WireCo’s end markets, driven by the volatile oil and gas sector, exposure to commodity costs (primarily steel) and competition in fragmented global markets for steel cables and wires.

WireCo has good liquidity that covers its cash outflows for the next 12 months starting in March 2022. The company had $28 million in cash at the end of March and $50 million available as part of its $115 million ABL facility expiring in 2026. Moody’s projects on $20 million in free cash flow generation in 2022 and more than $30 million in 2023, which will facilitate increased availability on the ABL as outstanding loans are repaid.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Moody’s could upgrade the ratings if the company’s operating profile further improves so that it can better weather the inherent cyclicality of the end market, as well as with better credit metrics. Specifically, Moody’s would upgrade if debt/EBITDA is below 3.5x, free cash flow/debt is above 10% and EBITA/interest expense is above 3.0x .

Moody’s could downgrade the ratings if industry conditions deteriorate and negatively affect WireCo’s earnings and cash flow generation. Pressure on ratings could also result from the implementation of aggressive financial policy actions, including large debt-financed acquisitions or distributions to shareholders. Specifically, Moody’s would downgrade if debt/EBITDA is above 4.5x, free cash flow/debt is below 5.0%, or EBITA/interest expense is below 2.0x .

Based in Prairie Village, Kansas, WireCo WorldGroup Inc. is a global manufacturer and marketer of wire rope, high-tech synthetic rope, electromechanical cable and other related products. The company sells in various industries including infrastructure, industrial, energy, mining, maritime and fishing. The company generated approximately $706 million in revenue for the twelve months ended March 31, 2022. WireCo is owned by subsidiaries of Onex Corporation and Paine Schwartz Partners LLC.

The main methodology used in these ratings is Manufacturing published in September 2021 and available at https://ratings.moodys.com/api/rmc-documents/74970. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These ratings are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Motoki Yanase
VP – Senior Credit Officer
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Gretchen French
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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