Moody's lowers API Heat CFR to B3

Moody's Investors Service said it downgraded API Heat Transfer ThermaSys Corp.'s (previously ThermaSys Corp.) corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

The rating on first-lien senior secured credit facilities, including $265 million term loan due 2019 and $35 million revolver due 2018, was affirmed at B1.

The outlook is stable.

Moody's said the action reflects weaker than expected operating performance of the company, including lower revenues and weaker earnings, which together with a slower than expected pace of debt repayments resulted in an increased leverage profile, and adjusted debt-to-EBITDA of 7.0x compared to 6.2x a year ago.

In the agency's view, API's current leverage and other credit metrics including adjusted FCF-to-debt of 1.5% (excluding dividends) and EBITA to interest coverage of 1.5x are more consistent with the B3 rating category.

Over the next 12 to 18 months, Moody's said it anticipates that any improvement in the company's revenue and earnings will be challenged by continuing weakness in certain end markets, resulting in constrained free cash flow generation and limited opportunities for debt repayment.

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