Victoria PLC downgraded to ’CCC+’ at S&P due to rising refinancing risk

Investing.com -- S&P Global Ratings has downgraded the long-term issuer credit rating of UK-based flooring products manufacturer and distributor, Victoria PLC, from ’B-’ to ’CCC+’. This decision comes as the company faces increasing pressure to refinance its impending debt maturities in 2026 amidst volatile credit market conditions.

Victoria PLC is yet to refinance a €489 million senior bond due in August 2026 and a partly drawn revolving credit facility (RCF) maturing in February 2026. The company is currently under pressure due to the large debt maturities it faces within the next 18 months.

The company’s operating performance has also weakened compared to the previous year, primarily due to ongoing low demand and high operating costs. S&P has revised down its EBITDA forecast for Victoria and expects negative free operating cash flow (FOCF) in fiscal 2025, which ended on March 29, 2025. This situation has put additional pressure on Victoria’s liquidity position.

The credit metrics are expected to remain weak, with S&P Global Ratings’ adjusted debt to EBITDA ratio, including preference shares with non-cash interest treated as debt, anticipated to be higher than 10x in fiscals 2025 and 2026. Victoria’s results for fiscal 2025 are expected to remain significantly challenged, with an expected revenue decline of close to 13%. This corresponds to an estimated S&P Global Ratings-adjusted debt to EBITDA ratio exceeding 11x.

Victoria’s liquidity position has deteriorated due to the size of near-term debt maturities and a negative FOCF forecast for fiscal 2025. The company’s RCF matures in February 2026, and given that it’s less than 12 months away, S&P does not consider it as a source of liquidity. The group’s liquidity position is supported by its cash holdings of £93 million as of September 28, 2024, along with estimated positive cash funds from operations (FFO) of £43 million.

The negative outlook indicates that S&P could further lower its ratings if it anticipates Victoria to face a default scenario, including a distressed debt exchange. The ratings could be revised to stable or increased if the company successfully refinances its near-term debt instruments and shows recovery in its operating performance.

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