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Moody’s downgrades Technicolor again

Moody's warned could be hindered by "increasingly challenging macro environment"

Rating agency Moody’s has again downgraded Technicolor’s financial rating, stating it reflects prolonged challenges in most of the company’s markets, evidenced by its performance and in particular by strongly negative free cash flow generation.

Technicolor was downgraded to B3 negative outlook last October. Moody’s has now downgraded it to Caa1 stable.

According to Moody’s, Technicolor’s recently announced 2020-2022 Strategic Plan could be “burdened if the anticipated weak film slate in 2020 is worse than expected or by an increasingly challenging macro environment.”

The stable outlook “reflects the expectation of a successful execution of the announced €300 million rights issue, which is conditional on the approval of the extraordinary general meeting on 23 March,” said Moody’s.

“Technicolor intends to bridge the rights issue with a proposed $110 million facility. The additional liquidity headroom is central to support the ongoing performance improvement measures, which might continue to burden the company’s free cash flow generation.”

Moody’s added, “Positive rating pressure could build up, in a scenario of a successful rights issue together with a successful execution of the Strategic Plan during the course of 2021, provided that free cash flow generation has turned around and profitability is improved, resulting in more adequate credit metrics which is expected by the company to materialise in 2021.”