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Investing.com -- S&P Global Ratings downgraded Concord, Ontario-based Kronos Acquisition Holdings Inc. to ’CCC+’ from ’B-’ due to tightening liquidity and ongoing operational challenges.
The downgrade reflects deteriorating financial performance following a fire at the company’s Conyers, Georgia raw materials warehouse in September 2024. In the first quarter of 2025, Kronos saw its EBITDA decline by 30% and revenue fall by 8.8% compared to the same period last year.
S&P also lowered ratings on Kronos’ senior secured debt to ’CCC+’ from ’B-’ and unsecured debt to ’CCC-’ from ’ CCC (WA:CCCP)’, while maintaining recovery ratings of ’4’ and ’6’ respectively.
The company’s financial metrics have weakened significantly, with S&P Global Ratings-adjusted debt-to-EBITDA ratio reaching approximately 15x for the twelve months ended April 4, 2025, and interest coverage falling below 1x.
In response to the fire incident, Kronos shifted most production to its Ontario, California facility and entered agreements with third-party co-manufacturers. However, the ramp-up of these operations has been slower than expected, leading S&P to project weaker second-quarter pool revenues compared to 2024.
Management announced it will not restart the Conyers facility but instead plans to establish a new manufacturing facility before the 2026 pool season. This decision will require about $50 million in capital expenditures through the first quarter of 2026.
These investments, combined with ongoing Conyers-related expenses, are expected to widen Kronos’ free cash flow deficits to approximately $120-125 million in 2025, up from earlier projections of $70-90 million.
As of March 31, 2025, the company had $43 million in cash and $157 million available under its asset-based lending facility. S&P noted that Kronos has received about $88 million in insurance proceeds so far.
The negative outlook indicates Kronos might struggle to restore its 2025 EBITDA amid ongoing operational costs, with EBITDA interest coverage potentially remaining below 1.5x. Additional capital investments could further strain the company’s liquidity over the next 12 months.
S&P could lower ratings further if facility-related challenges continue to affect EBITDA, free cash flow deficits widen beyond forecasts, or if the company pursues what S&P might view as a distressed exchange or debt restructuring.
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