Ideal Standard Faces Restructuring on Slow Recovery, Fitch Says

Ideal Standard International SA may face a debt restructuring little more than a year after Anchorage Capital Group took a 50 percent stake in the sanitary-ware maker.

Ideal Standard’s 429 million-euro ($481 million) debt pile is swelling, meaning a “restructuring is likely” on notes due in March 2018, according to Fitch Ratings.

The Belgian company that sells ceramic toilets and showers under brands including Armitage Shanks and Dolomite has struggled to recover after the financial crisis halted construction of residential properties, on which sanitary-ware sales depend. Ideal Standard’s business isn’t growing fast enough to cover its accumulating debt, Fitch said in an Aug. 17 report.

“The capital structure is unsustainable and recovery not yet large enough,” Ha-Ahn Bui, an analyst at Fitch, said in a phone interview. “Even if things got a bit better, Ideal Standard is still lagging behind what we previously expected and refinancing risk is rising.”

Fitch downgraded the company one level to CC on Aug. 17, two grades above default. It had raised Ideal Standard to CCC in September, after Anchorage provided a 50 million-euro super-senior facility to improve the liquidity position of the manufacturer.

Adjusted earnings before interest, tax, depreciation and amortization rose to 14 million euros in the first quarter of the year, up from 4 million euros last year.

Swap Control

Anchorage bought enough of Ideal Standard’s 275 million euros of the 2018 notes to secure a swap that handed half of the company to the hedge fund from Bain Capital Partners in June 2014, people familiar with the matter said at the time.

The new investor asked other bondholders to swap their bonds for payment-in-kind notes, which allow the borrower to pay interest with more debt instead of cash. While Ideal Standard won’t have to make interest payments on the bonds in the next three years, total debt will rise.

Ed Gascoigne-Pees, a Bain Capital spokesman employed by Camarco in London, declined to comment on the rating downgrade or the probability of a debt restructuring. An external spokesman for Anchorage employed by Sard Verbinnen in New York, wasn’t immediately available to comment.

Ideal Standard will release its second-quarter results on Aug. 28, according to a person familiar with the matter, who asked not to be identified because the results are private.