Pronovias downgraded to SD by S&P Global Ratings

S&P Global Ratings yesterday downgraded Pronovias Group (CatLuxe) to Selected Default, or SD, from CCC+, after the Spanish bridal wear designer switched interest on its €72 million second-lien loan from cash payments to pay-in-kind, or PIK. PIK interest payments accrue on an annual basis.

This modification is distressed in nature because, Ratings said, it believes the second-lien lender is receiving less favorable terms than originally promised under the credit agreement.

Pronovias disclosed with its 2021 budget that it converted the interest at 8.5% PIK on a fixed basis, from the initial floating rate of E+7.5%, with a 1% floor. The agreement is expected to generate €6.5 million of annual interest savings, which will be used to support the company's liquidity.

S&P Global Ratings said there are no changes on the terms and conditions of the term loan B. The loan is currently quoted at around 72.275-bid in secondary markets, according to IHS Markit pricing data.

Meanwhile, sponsor owner BC Partners has made a €21.5 million equity investment in the company to support liquidity, according to Ratings, which added that it will likely revisit its issuer credit rating on Pronovias in the coming days.

In January, Pronovias secured an amendment to waive the testing of the leverage covenant on its revolving credit facility for the next five quarters until June 2022, according to market sources. Pronovias previously reached a deal to waive testing of the covenant last year in the three quarters following the June testing date.

BC Partners bought Pronovias from founder shareholders for €532 million in 2017 in a deal backed by a €215 million term loan B, a €60 million second-lien loan and a €45 million revolver. The revolver came with a springing covenant to be tested once it is 40% drawn, and this required the leverage ratio to remain below 9.18x, Ratings said in April 2020. At that point, the revolver had around €4 million available for drawing, Ratings added.

Pronovias is based in Spain but is active in 95 countries. The company reported net sales and EBITDA in 2019 of €160.6 million and €43.4 million, respectively.