Investing.com -- On March 21, 2025, Moody’s Ratings announced an upgrade to the ratings of Chart Industries (NYSE: GTLS ), Inc. This included an elevation of its corporate family rating (CFR) to Ba3 from B1. The probability of default rating (PDR) was also raised to Ba3-PD from B1-PD. Furthermore, the ratings of its senior secured notes and senior secured bank credit facility were upgraded to Ba2 from Ba3, while the senior unsecured notes rating was lifted to B2 from B3. In addition, the company’s speculative grade liquidity rating (SGL) was upgraded to SGL-1 from SGL-2. Moody’s maintained a positive outlook for Chart Industries.

The upgrade is a reflection of Chart’s strong backlog and order growth, which Moody’s believes will support a revenue growth of about 9% in 2025 and 5% in 2026. The EBITA margin is expected to expand to approximately 22%. The company’s high level of aftermarket revenue, which accounted for about a third of its 2024 revenue, is expected to continue benefiting Chart’s margins. The company’s earnings improvement, along with debt repayment, resulted in a decline in Chart’s debt/EBITDA to 3.9x at the end of 2024, which is projected to approximate 3.0x at the end of 2025.

The positive outlook is due to the company’s strong liquidity and Moody’s projection that Chart will generate about $1 billion of cumulative free cash flow over the next two years. This will enable the company to fund shareholder returns and modest acquisitions while maintaining its debt/EBITDA around 3x.

Chart’s ratings are supported by its record backlog, high level of repair, service and leasing revenue, and its strong geographic diversification. Earnings growth is anticipated from demand for clean energy solutions, expansion in high growth markets such as hydrogen, liquefied natural gas (LNG) and carbon capture, as well as cost control efforts. However, Chart faces risks related to the macroeconomic environment, including pressure from tariffs, political tension with other countries, and geopolitical risk. Continued strength in LNG demand is also important to maintaining earnings growth.

Chart’s liquidity is very good, reflecting cash of just over $300 million at December 31, 2024, and about $1 billion of availability under its $1.25 billion committed revolver that expires in 2029. The company is expected to generate free cash flow of between $450 million and $500 million in 2025. There are no near term maturities, the company’s nearest maturity, besides the revolver, is 2030. The company is subject to leverage and coverage financial maintenance covenants, and is expected to maintain ample cushion for each over the next 12 to 18 months.

Ratings could be upgraded if Chart continues to grow its revenue base while maintaining its strong profitability. A downgrade could occur if there is deterioration in the company’s liquidity or if debt/EBITDA is sustained above 4.0x or is EBITA/interest expense approaches 2.5x.

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