DBRS downgrade EnerCare to BBB

DBRS said it downgraded the issuer rating and senior notes rating of EnerCare Solutions Inc. to BBB from BBB (high).

All trends are stable.

The rating actions follow DBRS’ review of EnerCare’s acquisition of Sehac Holdings Corp. for about $341 million, which closed May 11.

Pro forma the acquisition, the agency estimates the company’s 2016 cash flow-to-external debt ratio would weaken to about 18% (21.7% for the 12 months ending March 31, 2016 (LTM 2016)) while its external debt-to-EBITDA ratio would increase to around 3.5 times (3.1 times for LTM 2016).

DBRS previously noted that the company’s ratings would be downgraded by one notch if the cash flow-to-external debt ratio is below 20% and if the external debt-to-EBITDA ratio is higher than 3.5 times following the acquisition.

Additionally, the agency said it considers earnings and cash flows from Sehac Holdings to be less stable than EnerCare’s core water heater and HVAC rental business, and could potentially result in more volatile earnings going forward.

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