Moody’s drops Hi-Crush, loan to Caa1

Moody's Investors Service said it downgraded Hi-Crush Partners LP's corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD and senior secured term loan B due 2021 to Caa1 from B3.

The speculative grade liquidity rating was revised to SGL-4.

The outlook remains negative.

Moody’s said the downgrade and negative outlook reflect its expectation that EBITDA and key credit metrics will deteriorate further in 2016, stemming from on-going weakness in the oil and natural gas industry. The deterioration in Hi-Crush's end markets has resulted in a 34% decline in adjusted EBITDA in 2015 from 2014.

Key credit metrics have also weakened. Adjusted debt-to-EBITDA increased to 3.3 times from 1.7 times and adjusted EBIT-to-interest coverage declined to 3.5 times from 9.5 times for the same period. Adjusted operating margin also declined to 16.2% from 35.9%

In 2016, Moody's said it foresees material reductions in E&P capital spending.

Oversupply continues in the global oil markets, demand growth remains tepid and the timing of an oil price recovery is uncertain.

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