SPX Flow Inc. #BB-# Rating Outlook Revised To Positive From Negative

Stocks and Financial Services Press Releases Wednesday May 16, 2018 10:21
NEW YORK--16 May--S&P Global Ratings
NEW YORK (S&P Global Ratings) May 15, 2018--S&P Global Ratings today affirmed its 'BB-' corporate credit rating on SPX Flow Inc. and revised the rating outlook to positive from negative.

At the same time, we affirmed our 'BB-' issue-level rating on the company's $600 million senior unsecured notes. The '4' recovery rating is unchanged, indicating our expectation for average (30%-50%; rounded estimate: 30%) recovery in the event of a default.

The affirmation and outlook revision to positive reflects SPX Flow's significantly improved financial position, stemming from improved operating performance, strong cash generation, and debt reduction. It also reflects our view that favorable operating prospects along with process and operational improvements (stemming from realignment program), and near-term a continued emphasis on debt repayment should allow the company to further improve its financial measures and deleverage to below 2.75x by the end of 2018. Still, we believe there are potential uncertainties around the pace and extent of SPX Flow's deleveraging and its ability to sustain leverage below 3x.

The positive outlook reflects SPX Flow's improved credit measures as a result of the repayment of about $245 million of debt, along with our expectation that improving operating performance and a near-term focus on debt repayment should support additional deleveraging. In our view, there is at least a 1-in-3 chance that we could raise our ratings on SPX Flow if the company performs in line with our base-case expectations and demonstrates a willingness and ability to sustain its S&P Global Ratings-adjusted leverage ratio below 3x.

We could revise the rating outlook to stable if the improvement in SPX Flows' credit measures reverses and we see limited prospects for adjusted debt to EBITDA of 3x or better. This could occur as a result of further end-market deterioration or operational missteps, which would result in declining revenues and margin deterioration, or if it makes aggressive financial policy decisions regarding debt-funded acquisitions or shareholder returns.

We could raise our ratings on SPX Flow if the company's deleveraging trend continues and the company demonstrates a willingness and ability to sustain its S&P Global Ratings-adjusted leverage below 3x over a cycle.


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