Moody's upgrades Michael Baker

Moody's Investor Service said it upgraded the corporate family rating of Michael Baker International, LLC to B2 from B3 and concurrently upgraded the rating of the 8¾% senior secured notes due 2023 to B2 from Caa1.

The outlook is stable.

The upgrades follow several corporate and debt structure changes in recent months that have improved the company's prospects for profitability and steady free cash flow generation, the agency said.

Michael Baker finalized its Balad, Iraq Airfield base operations contract with the U.S. Air Force in the summer of 2018, which enabled a long-awaited collection on unbilled receivables, Moody's explained.

The associated subsidiary, Sallyport Holdings, was then spun-off and sold resulting in divestiture proceeds, the agency said.

Michael Baker applied these cash inflows toward debt reduction, including a $170 million pre-payment on the first-lien term loan, leaving only $80 million outstanding on the loan, Moody's said.

On Nov. 1, the company also received a $66.8 million distribution from an interest retained in Sallyport Holdings, Moody's said.

Along with $13 million of new drawing under the revolver, the first-lien term loan was fully repaid.

The ratings were upgraded due to the debt reduction and spin-off, Moody's said, and now that the company's debt-to-EBITDA ratio is less than 5x.

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