Moody's upgrades Preferred Proppants, rates loan B3

Moody's Investors Service said it upgraded Preferred Proppants, LLC's corporate family rating to Caa1 from Caa3 and probability of default rating to Caa1-PD from Ca-PD/LD and assigned a B3 (LGD3) rating to its $350 million senior secured term loan. The outlook was revised to stable from negative.

The rating action follows the announced recapitalization of Preferred Proppants with a $50 million ABL facility (unrated), the new term loan and $300 million of second-lien notes (unrated). The existing debt, which had been operating under a forbearance agreement since September 2013, and all accrued interest was paid off fully upon the closing of the recapitalization.

The agency said the upgrade reflects Preferred Proppants’ new capital structure, which enhances the company's liquidity profile over the near term.

The Caa1 corporate family rating reflects Preferred Proppants' small scale, high debt leverage, limited amount of Northern white frac sand reserves, end market concentration in the cyclical oil and gas industry and lack of free cash flow as the company invests in a new sand and resin plant through 2015, Moody’s said.

The ratings also considers recent demand growth for frac sand due to advancements in hydraulic fracturing technology, Preferred Proppants' growing market share for its resin-coated sand product, the company's high customer concentration and the company's private ownership by a combination of management and private equity, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.