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Moody’s cuts Kenan Advantage, loans, notes
Moody's Investors Service said it downgraded Kenan Advantage Group, Inc.’s corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD, senior secured back credit facilities to B1 from Ba3 and senior unsecured notes to Caa1 from B3.
The outlook was changed to stable from negative.
Moody’s said the downgrade was driven by lower than expected operating performance relative to the agency’s expectations, following the leveraging acquisition by Omers Private Equity in July 2015.
Operating margins contracted below the anticipated level of 6% to 6.5% (all metrics inclusive of Moody's standard adjustments) over the past few quarters, mainly as a result of challenging energy and industrial end-market conditions affecting Kenan's chemical, industrial gas and crude/shale-related energy services in the U.S. and Canada. The lower margins, coupled with a higher interest and debt burden, resulted in leverage (Debt/EBITDA) of about 6 times and weak interest coverage (EBIT/Interest) below 1 time.
The downgrade also reflects Moody's expectation that leverage will likely remain elevated over the next year, amidst a continuing difficult operating environment, the agency added.
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