Rating Action: Moody’s affirms Aramark CFR at Ba3, sr sec at Ba2, sr uns at B1; outlook stableGlobal Credit Research – 14 Mar 2022Over $8 billion of rated debtNew York, March 14, 2022 — Moody’s Investors Service (“Moody’s”) affirmed Aramark Services, Inc.’s (“Aramark”) corporate family rating (“CFR”) at Ba3, probability of default rating (“PDR”) at Ba3-PD, senior secured at Ba2 and senior unsecured at B1. The Speculative Grade Liquidity (“SGL”) rating is maintained at SGL-1. The outlook remains stable.RATINGS RATIONALE”As COVID-19-related disruption to Aramark’s businesses continues to wane, revenue should climb back toward pre-pandemic levels, thereby fortifying still-weak credit metrics and providing support to the Ba3 CFR,” said Edmond DeForest, Moody’s Senior Vice President.The affirmation of the Ba3 CFR reflects Moody’s expectations for revenue, profits and free cash flow to continue to recover steadily and substantially, although slowly, driving debt to EBITDA of 8.0 times as of December 31, 2021 toward 5.0 times by fiscal 2023 (ends September). Revenue fell by more than 25% peak-to-trough during FY2020 and 2021. Moody’s anticipates revenue will grow by around that amount over the next 12 to 18 months. Revenue and credit metrics are expected to remain weak relative to FY2019 levels until FY2023. Moody’s expects adequate cash from operations to cover capital investments, capital expenditures, the regular shareholder dividend and required debt amortization. Financial leverage declines will come from slow EBITDA expansion and some debt repayment. Moody’s also anticipates modest free cash flow metrics compared to many other business service companies also rated in the Ba3 rating category over the longer term given the need to invest in new contracts before revenue is earned.All financial metrics cited reflect Moody’s standard adjustments.Moody’s considers Aramark’s business generally stable and predictable, with long term contracts and fixed asset investments providing high revenue visibility and meaningful competitive barriers. Moody’s anticipates Aramark will maintain market share and remain well positioned to rebound as customers resume their normal operations. Aramark is a leading provider of food and support services in the United States with operations globally and is the second largest provider of uniform and career apparel rental and sales in the United States. The scope of Aramark’s operations in both business lines, featuring thousands of highly recurring customer contracts, provides strong support for the ratings. Demand for food and related and uniform services from many of Aramark’s business and entertainment customers has not yet recovered to pre-pandemic levels, whereas customers in education, healthcare and those seeking services including sanitization have proven more resilient. EBITA margins around 3% in the LTM period ended December 31, 2021 are expected to rebound to above 5% in FY2022 and in a 6% to 7% range in FY2023.Social risks facing Aramark’s food service and uniform and related services include a diverse set of workplace and food safety and waste water handling rules and regulations. Aramark has a track record of complying with applicable laws. Aramark maintains job-appropriate training of its large almost 250,000 person employee base and board oversight of its risk management practices.As a public company, Aramark provides transparency into its governance and financial results and goals. The board of directors is controlled by independent directors. In late 2019, there were 5 director and several executive officer changes, including of the Chairman, CEO and CFO. Among Aramark’s stated near term capital allocation priorities are net financial leverage reduction, investing in the business and cash returns to shareholders. Moody’s considers Aramark’s financial strategies balanced and transparent. Aramark’s financial leverage remains well in excess of the company’s target range.The Ba2 rating on the senior secured credit facilities reflects their priority position in the debt capital structure and a loss given default (“LGD”) assessment of LGD2. The notes are secured by a first lien pledge of substantially all of the company’s domestic assets (excluding accounts receivable pledged for the securitization facility) and 65% of the stock of direct foreign subsidiaries. The Ba2 rating, one notch above the Ba3 CFR, benefits from loss absorption provided by the junior ranking debt and non-debt obligations.The B1 rating on the senior unsecured notes reflects a loss given default assessment of LGD5. The senior notes are guaranteed by substantially all of the domestic subsidiaries of the company (excluding the securitization subsidiaries). The loss given default assessment reflects effective subordination to all the secured debt and certain trade claims at default. The B1 rating is one notch higher than the outcome utilizing Moody’s Loss Given Default methodology, reflecting Moody’s expectations for a decrease in the proportion of secured to total debt once the currently fully drawn $1 billion revolver and $450 million asset securitization facilities are repaid.The SGL-1 speculative grade liquidity rating reflects Aramark’s very good liquidity profile, including from $415 million of cash as of December 31, 2021 and over $1 billion of available revolver and securitization commitments. Moody’s expects over $200 million of free cash flow in FY2022. The $1.2 billion revolving credit facility expires mostly in 2026 ($53.7 million of the revolving commitments expire in 2023) and there is a $450 million accounts receivable securitization facility maturing in 2024. The revolving credit facilities have a net senior secured debt to EBITDA covenant, as amended. Moody’s expects Aramark will maintain a good cushion with the covenant over the next 12 to 15 months. The fiscal first quarter is typically a seasonal borrowing peak for Aramark.The stable outlook reflects Moody’s anticipation of strong revenue growth driving elevated debt to EBITDA down toward 5.0x in FY2023. The stable outlook also anticipates Aramark will maintain balanced financial strategies and a very good liquidity profile.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be upgraded if revenue and profit rates recover to exceed their pre-pandemic levels and Moody’s expects Aramark will maintain: 1) at least 1% to 2% revenue growth; 2) EBITA margins around 7%; 3) free cash flow of at least $400 million; and 4) debt to EBITDA below 4.5 times.The ratings could be downgraded if: 1) revenue remains pressured due to an expansion of adverse impacts from COVID-19, a loss of customers or declines in market share; 2) liquidity weakens; or 3) debt to EBITDA will be maintained above 5.5 times.The principal methodology used in these ratings was Business and Consumer Services published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287897. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.The following ratings/assessments are affected by today’s action:..Issuer: Aramark Services, Inc….. Corporate Family Rating, Affirmed Ba3…. Probability of Default Rating, Affirmed Ba3-PD….Senior Secured Bank Credit Facility, Affirmed Ba2 (LGD2 from LGD3)….Senior Unsecured Regular Bond/Debenture, Affirmed B1 (LGD5)….Outlook, Remains Stable..Issuer: ARAMARK Canada Ltd…..Senior Secured Bank Credit Facility, Affirmed Ba2 (LGD2 from LGD3)….Outlook, Remains Stable..Issuer: Aramark International Finance Sarl….Senior Unsecured Regular Bond/Debenture, Affirmed B1 (LGD5)….Outlook, Remains Stable..Issuer: Aramark Investments Limited….Senior Secured Bank Credit Facility, Affirmed Ba2 (LGD2 from LGD3)….Outlook, Remains StableAramark (NYSE:ARMK), based in Philadelphia, PA, is a provider of food and related services to a broad range of institutions and the second largest provider of uniform and career apparel in the United States. Moody’s expects fiscal 2022 (ends September) revenue of around $15 billion.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Edmond DeForest Senior Vice President Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Karen Nickerson Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY’S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY’S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
4 October 2023, Wednesday
