Dynamo Midco credit rating affirmed as Innomotics recovery outlook stays stable

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Dynamo Midco credit rating affirmed

Highlights

Fitch affirms Dynamo Midco B.V.'s 'B' Long-Term IDR with Stable Outlook, citing Innomotics’ gradual recovery aided by restructuring and electrification market exposure.
Revenue expected to decline 9% in Q3 2026 before rebounding with 5% annual growth from 2027, while EBITDA margin drops to 12.3% in 2026 and improves thereafter.
Fitch projects leverage to peak at 6.3x end-fiscal 2026 and fall toward 5x by 2029, supported by positive free cash flow, EUR100 million term loan B add-on and EUR215 million undrawn RCF.

Fitch outlines recovery path through 2029

As reported by Fitch Ratings, Dynamo Midco B.V.'s Long-Term Issuer Default Rating remains at 'B' with a Stable Outlook, while Dynamo Newco II GmbH and Dynamo U.S. Bidco Inc. keep their senior secured ratings at 'B+' with Recovery Ratings of 'RR3'. The rating action reflects expectations that Innomotics can recover gradually after revenue pressure in 2026, helped by restructuring and exposure to expanding electrification and data centre markets.

Fitch expects revenue to bottom out in 2026 and then rise from 2027. The agency says revenue falls 9% in the third quarter of 2026 as competition intensifies in key markets, especially in low-voltage motors and services, where delayed large project orders also weigh on performance. It adds that lower-priced rivals redirect sales from the U.S. to Europe after tariff implementation, putting pressure on volumes and pricing for European mid-tier suppliers such as Innomotics.

From 2027, Fitch forecasts 5% revenue growth as order intake recovers and the company expands its product range across low-voltage and high-voltage motors. The agency also expects EBITDA margin to decline to 12.3% in 2026 from 13.1% in 2025 before improving gradually from 2027, as revenue recovers and restructuring addresses inefficiencies following the carve-out.

Liquidity and leverage remain central to rating case

Fitch expects leverage to peak at 6.3x at the end of fiscal 2026 before declining toward 5x by fiscal 2029, a path it says remains consistent with current rating sensitivities. The agency links that outlook to improving profitability and management's financial policy, even after capital structure changes in fiscal 2026 including a EUR100 million add-on to the euro term loan B, higher factoring use and a further EUR30 million revolving credit facility drawdown to support working capital.

The rating also depends on liquidity staying adequate. Fitch says free cash flow should recover to break-even by the third quarter of fiscal 2026 and turn positive over the medium term, supported by lower restructuring costs and easing working-capital volatility after renegotiated contract terms. It forecasts an average free cash flow margin of 2.7% through fiscal 2029 and notes that undrawn revolving credit facility capacity stands at EUR215 million at end-June 2026.

Fitch adds that Innomotics' geographic spread and end-market diversification help offset structural changes in the low-voltage motor market and rising competitive pressure. Investment in a broader product portfolio and a more comprehensive high-voltage motor offering is expected to strengthen the group's market position and improve access to demand tied to electrification and data centre investment.

Fitch’s rating review of Paprec’s acquisition-driven expansion outlined how the planned Marius Pedersen and Brantner deals in Central and Eastern Europe could reshape the group’s credit profile. Our earlier article noted that Fitch kept Paprec’s 'BB' rating with a Stable Outlook while flagging a narrow deleveraging path, with leverage expected to peak around 2027 before easing toward 2029 as EBITDA grows and diversification increases.

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