Arvos downgraded to Caa1 on maturity extension

Triton-backed auxiliary power equipment provider Arvos has been given a one-notch downgrade by Moody's to Caa1 on negative outlook. Moody's noted that a proposed two-year amend-to-extend counts as a distressed exchange under its criteria.

The proposed amend-to-extend is expected to close within the next 30 days and will extend the firm's term loan B and revolver by two years to August 2023 and May 2023, respectively. In its assessment, Moody's notes that the deal is a slight credit positive as it alleviates concerns over the company's liquidity profile given the approaching maturities. Even so, Moody's adds the firm's leveraged capital structure may not be sustainable in the longer term without a material improvement in EBITDA as the deal does not reduce debt levels. Arvos continues to face a challenging environment in many of its core markets including power generation and petrochemicals, Moody's concludes.

Triton's investment in Arvos dates from its carve-out of Alstom's auxiliary components business for €730 million in 2014. The deal was backed by a loan financing split between first-lien term loans of $200 million and €163 million and a €120 million-equivalent second-lien. Arvos returned in April 2017 when it allocated a €130 million term loan add-on to take out the second-lien priced at E+450 with a 1% floor. In secondary the euro term loan is quoted in a mid-80s context, up by about 3 points on the year.

Luxembourg-based Arvos LuxCo Sarl supplies air preheaters and gas heaters for thermal power plants, critical heat solutions for process industries and grinding equipment. It is rated B- on CreditWatch negative by S&P Global Ratings following a downgrade to the outlook in October 2020.