Moody’s cuts Emeco notes to Ca

Moody's Investors Service said it downgraded the rating on the $282.7 million senior secured Rule 144A notes due March 2019 issued by Emeco Pty Ltd. to Ca from Caa1.

At the same time, the agency affirmed Emeco Holdings Ltd.’s corporate family rating at Caa1.

The outlook remains negative.

Moody’s said the action follows Emeco's March 16 announcement that its creditor scheme of arrangement received – by face value – at least 75% noteholder approval. Therefore, the court approved and orders lodged with the Australian Securities and Investments Commission, deeming it as effective for the implementation of a merger by Emeco with Orionstone Holdings (unrated) and Andy's Earthmovers (unrated), as well as the recapitalization of Emeco.

Under the agreement, Emeco's noteholders, Orionstone, and Andy's creditors will receive a share of around 50% of the ordinary shares of the combined group and $357.4 million in senior secured tranche B notes with a five-year maturity. As a result, Emeco's debt maturity profile will be extended to March 2022 from March 2019.

Moreover, a new revolving loan facility of A$65 million with a three-year maturity and a fully underwritten rights issue for A$20 million, will be implemented.

"The transaction constitutes a distressed exchange, which is a default event under Moody's definition. The downgrade of the senior secured 144A notes to Ca considers this default and our assessment of the resultant high economic loss when compared to the original payment promise for the notes," Moody's analyst Kirsten Lee said in a news release.

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