Moody’s ups some Sequa ratings

Moody’s Investors Service said it upgraded its ratings for Sequa Corp., including the company’s corporate family rating to Caa2 from Caa3 and probability of default rating to Caa2-PD from Caa3-PD.

For Sequa Mezzanine Holdings LLC, Moody’s assigned a Caa1 rating to the company’s first-lien senior secured credit facilities comprised of a revolver due 2023, a term loan due 2023 and a new first-lien term loan due 2025. Moody’s also assigned a Caa3 rating to the company’s senior secured second-lien term loan due 2024.

Concurrently, Moody’s downgraded ratings on the existing first-lien revolver due 2021 and existing first-lien term loan due 2021 to Caa3 from Caa2. Moody’s also affirmed the Ca ratings on the existing second-lien term loan due 2022.

Moody’s said it appended an /LD designation to Sequa’s Caa2-PD probability of default rating following the company’s deemed limited default event that transpired concurrently with the recent successful closing of its restructuring transaction. Moody’s said it would remove the /LD designation from the probability of default rating after three days. The outlook is stable.

The actions follow the company’s recent extension of its capital structure across its first- and second-lien tranches, and incremental $256 million capital raise comprised of a $200 million first-lien term loan and $56 million in preferred equity, the agency said. Proceeds will be used to repay revolver borrowings, repay a portion of first- and second-lien term loans, and fund cash to the balance sheet and pay associated fees and expenses.

“Moody’s believes the proposed transaction constitutes a distressed exchange, given the nature of the transaction which subordinates claims of non-extending lenders and affords sub-market rates for extending lenders, including a payment-in-kind (PIK) option instead of cash for a component of interest expense, Moody’s said in a press release.

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