Fitch Ratings downgraded Newell Brands Inc.’s long-term issuer default rating to BB-plus from BBB-minus, lowering it to speculative-grade, or “junk” status, from investment grade.
“The downgrade reflects the significant deterioration in underlying core operations; lack of visibility to topline and EBITDA stabilization and therefore the level of sustainable FCF generation; and Fitch’s expectation that leverage will be at 3.5x or higher even if the company diverts all asset sale proceeds toward debt paydown, after offsetting around $400 million in negative FCF expected in 2019,” according to the rating agency.
Fitch expects Newell to generate EBITDA for ongoing operations of around $1 billion in 2019 vs. management’s guidance for $1.1 billion. The ratings agency also sees EBITDA only improving modestly after 2019 vs. management’s guidance of over $1.65 billion.
A Wall Street Journal Report on Thursday also indicated that Newell Brands’ Chief Executive Michael Polk is under pressure from the board of directors to prove his turnaround is working following several disappointing quarters. The board, which includes several activist investors, have discussed replacing Polk while also exploring stock incentives for Polk to support the turnaround efforts.
