Moody’s drops ModSpace, notes

Moody's Investors Service said it downgraded Modular Space Holdings, Inc.’s corporate family rating to Caa3 from Caa1 and the rating of senior secured notes issued by wholly owned subsidiary Modular Space Corp. to Ca from Caa2.

All ratings are on review with a direction uncertain.

The action follows ModSpace's Aug. 15 announcement that its conditional agreement to merge with Williams Scotsman International, Inc., a subsidiary of Algeco Scotsman Global Sarl (corporate family rating Caa1, negative), has been terminated.

The Caa3 corporate family rating that results from the two-notch downgrade reflects potential losses Moody's believes ModSpace's creditors would incur if the company defaults, for instance as a result of failing to successfully renegotiate its asset-based revolving credit facility that expires on Aug. 29, 2016.

The agency said it believes that a distressed exchange is possible on ModSpace's senior notes that are now rated Ca, indicating a potential loss of 35% to 65%. ModSpace did not make its Aug. 1 semiannual interest payment on the notes, and has disclosed that it is in negotiations with certain holders of the notes and is evaluating potential changes to its capital structure.

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