Moody’s has downgraded its solvency rating of Vigo, Spain-based Grupo Ibérica de Congelados (Iberconsa) due to its high debt load.
Iberconsa is a vertically integrated frozen seafood specialist, with operations stretching across fishing, processing, manufacturing, wholesale and retail marketing, cold storage, and distribution. The company’s fleet – comprised of 45 vessels in 2019 – operates primarily in Argentina, Namibia and South Africa, and the company’s products are sold in more than 60 countries. It was acquired in 2019 by U.S. investment fund Platinum Equity.
Iberconsa is pushing to refinance EUR 400 million (USD 442 million) of short-term debt Platinum Equity took on to finance its acquisition, according to El Confidencial. In May 2023, Moody’s downgraded that debt, as well as Iberconsa’s EUR 375 million (EUR 414 million) credit line, which matures in June 2024, to “junk bond” status, and it scaled up its rating on the company’s default risk from Caa1 to Caa3, its third-lowest rating. And Moody’s downgraded its outlook for the company’s future from stable to negative, meaning if it issues another rating change, it is more likely to be a downgrade rather than an upgrade.
"The downgrade of Iberconsa's rating reflects the weakness of its liquidity level and the concern about the resistance capacity of its capital structure in the context of the rise in interest rates and the proximity of the maturity of the debt,” Moody's said in its report.
Moody’s warned inflation has made the cost of borrowing more expensive, and that Iberconsa is already paying 7 percent interest on EUR 300 million (EUR 331 million) in debt, which would rise to at least 11 percent at current rates, with each percentage point rise increasing costs EUR 3.6 million (EUR 3.9 million), according to Pescare. In 2022, Iberconsa paid EUR 14.4 million (USD 15 million) in interest on its debt.
Moody’s recommended Platinum Equity inject more capital into Iberconsa to avoid potential default, calling its current capital structure “unsustainable” due to its debt amounting to more than seven times its operating profit.
In 2022, Iberconsa had EUR 425 million (EUR 470 million) in sales and an adjusted operating profit of EUR 68 million (EUR 75 million). Moody’s said Iberconsa had not been able to pass along rising costs to consumers in the form of higher prices, and that it had struggled as consumers moved away from seafood in favor of cheaper protein such as chicken due to the global inflationary crisis.
"The company's operating behavior in 2022 was weaker than expected, while the recovery projections in 2023 will be lower than we had previously anticipated," Moody’s said.
Earlier this year, Iberconsa was reported to have interest in acquiring fellow Galician seafood firm Nueva Pescanova, which is struggling with its own debt troubles.
Photo courtesy of Iberconsa
