S&P Global Ratings on Sept. 25 downgraded Aston Martin Lagonda Global Holdings PLC's issuer credit and issue ratings to CCC+ from B- after the company reached the ceiling of its sustainable term debt and cash interest burden.
The outlook is negative. This reflects ongoing pressure on the company's profitability, a high cash burn and very high leverage amid heightened risks posed by a possible no-deal Brexit and tariffs on new vehicle exports to the U.S.
The agency also assigned its CCC+ rating to the company's proposed new $150 million senior secured cash and payment-in-kind toggle notes and $100 million delayed draw notes, with a recovery rating of 4.
The rating agency expects a negative free operating cash flow of £160 million to £170 million in 2019 following major expenses. It also forecasts S&P-adjusted leverage of more than 30x for the full year and debt of about £1.23 billion due to the new notes.
However, Ratings believes that the additional liquidity can support the company's ambitious strategy, which includes the global launch of its new luxury SUV, the DBX, in December and a subsequent increase in production.
The agency also noted the risks that a possible no-deal Brexit pose to the company, which mainly produces cars in the U.K. New U.S. tariffs are also a possible risk, though that would likely have a lesser impact.
The agency said a further downgrade could occur should Aston Martin experience weaker-than-forecast sales volumes or profitability in fiscal 2019. It could revise its outlook on Aston Martin to stable if the company fully delivers on its full-year revenues, margins and operating cash flows targets.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.
