S&P revises Modular Space to negative

Standard & Poor's said it revised its outlook on Modular Space Corp. to negative from stable.

At the same time, the agency affirmed the company’s ratings, including the B- corporate credit rating. The B- rating on the $365 million senior secured second-lien notes due 2019 and 3 recovery rating indicates an expectation of meaningful (50%-70%) recovery to holders of these notes in the event of a payment default.

S&P said the outlook revision reflects its view that Modular Space's credit metrics could remain weak, stemming largely from losses related to a customer dispute on a large sale, foreign exchange losses due to the strength in the U.S. dollar compared to the Canadian dollar, continued softness in domestic markets, and declining oil prices, which S&P expects to have an impact on Canada, the company's highest margin geography.

The agency’s base-case forecast assumes that the ratio of funds from operations to debt will remain in the 3%-4% range in 2015. In addition, it could revise its liquidity assessment to "less than adequate" from "adequate" if the company does not refinance in a timely manner its asset-based lending facility maturing June 2016.

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