S&P cuts Global Eagle, facility, convertibles

S&P said it lowered the corporate credit rating on Global Eagle Entertainment Inc. to B from B+.

The corporate credit rating remains on CreditWatch, where it was placed with negative implications on May 11.

At the same time, the agency downgraded the issue-level rating on the company's senior secured credit facility to B+ from BB-. The recovery rating remains 2, indicating an expectation for substantial (70%-90%; rounded estimate: 70%) recovery for lenders in the event of a payment default.

S&P also lowered the issue-level rating on the company's senior unsecured convertible notes to CCC+ from B-. The recovery rating remains 6, indicating an expectation for negligible (0%-10%; rounded estimate: 0%) recovery for lenders in the event of a payment default.

The issue-level ratings remain on CreditWatch, where they were placed with developing implications on May 11.

S&P said the downgrade follows Global Eagle's announcement that it is seeking an amendment to its credit agreement that would enable it to further delay filing its annual report. At the same time, the company provided guidance for certain financial measures that lead S&P to believe credit metrics will be weaker than previously expected.

Under the agency’s base-case scenario, it had anticipated that leverage in the mid-6 times area in 2016 would decline to the mid-4 times area in 2017. It now believes it will be difficult for the company to meaningfully reduce leverage over the next two years, resulting in leverage above our previous downgrade threshold of 5.25 times.

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