Moody's alters US Ecology view to negative

Moody's Investors Service said it changed US Ecology Holdings, Inc.’s outlook to negative from stable and affirmed the ratings, including the Ba3 corporate family rating and Ba3 senior secured debt rating. Concurrently, Moody's downgraded the company's speculative grade liquidity rating to SGL-3 from SGL-2.

“The negative outlook reflects the uncertainty as to a meaningful end market recovery with the lingering economic effects of Covid-19 driving a protracted recovery in key credit metrics. This follows a period of underperformance after the late 2019 acquisition of NRC, which more than doubled debt. Delays and deferrals of sizeable treatment-and-disposal (T&D) event business is driving a lower margin service mix into 2022,” Moody’s said in a press release.

Moody's said it sees the company’s adjusted debt to EBITDA approaching 5x in 2021. “This is high for the rating level and relative to Moody's prior expectations of below 4x by year-end 2021. Moody's expects improving fundamentals and pricing actions to drive moderately better metrics through 2022. However, leverage is likely to remain high (although falling towards 4x) absent more meaningful earnings growth and voluntary debt reduction,” the agency said.

The lower speculative grade liquidity rating reflects the view that headroom under the debt leverage covenant will be limited as thresholds step down periodically until the fourth quarter of 2022, the agency said.

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