Trading Nvidia earnings report? These are the entry and exit levels to watch for
Investing.com -- Moody’s Ratings has affirmed ATS Corporation’s Ba3 corporate family rating while changing the outlook from positive to stable, reflecting expectations that the company’s debt to EBITDA will remain above 3.5x over the next 12 to 18 months.
The rating agency maintained ATS’s probability of default rating at Ba3-PD, senior unsecured rating at B1, and speculative grade liquidity rating at SGL-2.
"The change in outlook reflects that ATS’ debt to EBITDA will remain above 3.5x over the next 12 to 18 months after the planned transition away from transportation and the challenges faced during FY25 due to the EV customer issue," said Will Gu, Moody’s Ratings analyst.
Despite high financial leverage of approximately 4.5x (adjusted for debt repayment from EV settlement proceeds), Moody’s noted that ATS maintains strong revenue visibility with a trailing twelve-month book-to-bill ratio well above 1x and a healthy backlog supporting expectations for a return to organic growth.
The company’s rating benefits from its track record of deleveraging after acquisitions, with Moody’s expecting debt to EBITDA to improve to around 3.8x by the end of FY 2026 and about 3.5x in FY2027. Additional strengths include good geographical and end market diversification, growing revenue in regulated high-margin markets like life sciences, and anticipated return to strong free cash flow generation.
Constraints on the rating include debt to EBITDA remaining above 3.5x for some time, small scale among large competitors, volatile order bookings in a cyclical manufacturing industry, and an active acquisition strategy involving releveraging risks.
ATS is expected to maintain good liquidity over the next 12 months with total sources of about C$1.2 billion, including C$226 million cash on hand as of March 31, 2025, expected free cash flow of around C$150 million over the next four quarters, and full availability under its C$750 million revolver expiring November 2026.
The stable outlook indicates Moody’s expectations that the transportation segment is close to bottoming out after resolving FY25 issues, and that ATS will return to organic growth, achieve significant deleveraging in FY26, generate strong free cash flow, and maintain good liquidity.
Moody’s indicated the ratings could be upgraded if ATS maintains positive free cash flow, stable organic revenue growth, and debt to EBITDA below 3.5x. Conversely, ratings could be downgraded if debt to EBITDA remains above 4.5x, liquidity deteriorates, or if revenue and EBITDA continue to decline.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.