Fitch maintains Vista’s B+ rating despite negative FCF

Fitch Ratings has affirmed Vista Global Holding’s B+ rating, citing the company’s global market position and diversified operations while highlighting concerns about its niche operations, concentrated ownership and high EBITDAR leverage.

Despite these challenges, Vista’s rating was supported by its strong market position, geographic and customer diversification, and growing share of contracted revenue. However, the company’s negative free cash flow (FCF) in 2023 was a significant factor in the rating assessment.

“Negative FCF in 2023: The company underperformed our forecast for 2023 in FCF generation. This was driven mainly by extensive aircraft refurbishments exceeding our assumptions for last year, as well as working-capital outflow predominantly due to the paydown of trade payables. We expect maintenance capex to normalise at around $160m per year, as the refurbishment cycle has been completed,” said the ratings agency in its update.

Fitch expects Vista’s EBITDAR, earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, leverage to decrease in the coming years, reaching a level of negative sensitivity of 5.5x in 2024 and further in 2025-2027. The agency attributed this improvement to the completion of the company’s extensive aircraft refurbishment program and normalisation of working capital trends.

The ratings agency said that despite the negative FCF in 2023, Vista’s profitability remains sound. The company’s EBITDAR increased from $663m in 2022 to $704m in 2023. Fitch expects further growth in 2024, driven by higher aircraft utilisation, increased contracted live hours, and a shift towards more profitable products.

Earlier this year in April, S&P Global Ratings lowered its outlook on private jet operator Vista Global Holding to negative from stable, citing a disappointing financial performance in 2023 that fell short of expectations.

S&P affirmed Vista’s ‘B+’ credit rating.