S&P downgrades Freedom Group

Standard & Poor’s said it lowered the corporate credit rating on Freedom Group Inc. to B- from B.

The outlook is stable.

The agency also said it lowered the rating on the company’s $575 million senior secured term loan due 2019, issued by subsidiary FGI Operating Co. LLC, to B- from B.

The recovery rating remains at 3, reflecting 50% to 70% expected default recovery.

S&P also said it also lowered the rating on the company’s senior secured notes due 2020 co-issued by subsidiaries FGI Operating Co. LLC and FGI Finance Inc. to CCC from CCC+.

The recovery rating on these notes remains at 6, indicating 0 to 10% expected default recovery.

The downgrades reflect an expectation that EBITDA at Freedom Group will be weaker through 2016 than previously anticipated and, as a result, credit measures will be very weak, S&P said.

The lowered EBITDA forecast in 2015 is the result of lower-than-expected demand and lower average selling prices for firearms and ammunition in the first half of 2015 due to discounting and a mix shift toward lower priced products, the agency said.

S&P downgrades SAExploration

Standard & Poor's said it lowered the corporate credit rating on SAExploration to SD (selective default) from B-.

The agency also said it lowered the rating on the company's senior secured notes to D from B-. The recovery rating on the notes remains at 3, reflecting 50% to 70% expected default recovery.

The downgrade follows news that the company has concluded an agreement with holders of a portion of its senior secured notes for common stock, S&P said.

The transaction is viewed as a distressed exchange because at the close of the transaction, investors received stock valued at less than what was promised on the original securities, the agency said.

The $10 million announced amount of the debt-for-equity exchange reduces the amount of senior secured notes outstanding, marginally improving leverage, S&P said.

The ratings reflect the company's current liquidity position, while still taking into account its challenging operating environment and high, though marginally improved, leverage, the agency said.

Moody’s downgrades Sequa

Moody’s Investors Service said it downgraded the ratings on Sequa Corp., including its corporate family rating to Caa2 from Caa1 and probability of default rating to Caa2-PD from Caa1-PD.

The downgraded ratings include the company’s $200 million senior secured revolver due 2017 to Caa1 (LGD 3) from B3 (LGD 3), $1.27 billion senior secured term loan due 2017 to Caa1 (LGD 3) from B3 (LGD 3) and $350 million senior unsecured notes due 2017 to Ca (LGD 5) from Caa3 (LGD 5).

The outlook is negative.

The downgrades reflect a weakening liquidity profile driven by expectations of negative free cash flow and concerns about further erosion in earnings, Moody’s said.

In conjunction with the ensuing elevated default risk, the highly leveraged balance sheet calls into question the sustainability of the company’s capital structure, the agency added.

Sequa’s highly leveraged balance sheet and weak cash flow profile heighten the company’s near-term default risk and increase the likelihood of a requisite restructuring event in the next 12- to 18-months, Moody’s said.

These negative considerations are partially mitigated by Sequa’s well-established market position within its niche engine repair- and parts-segment, the agency said.

Moody’s downgrades SFX

Moody’s Investors Service said it downgraded SFX Entertainment, Inc.’s corporate family rating two notches to Caa3 from Caa1 and revised the outlook to negative.

The ratings on the company’s second-lien senior secured notes also were downgraded to Caa3 (LGD 4) from Caa1 (LGD 3), along with its first-lien senior secured revolving credit facility to B2 (LGD 1) from B1 (LGD 1) and speculative grade liquidity rating to SGL-4 (weak) from SGL-3 (adequate).

The downgrades conclude a review that began in May, Moody’s said.

With negative EBITDA and no tangible signs of operations becoming cash flow positive, Moody’s said it thinks that the company requires additional financing. It is not clear that alternative funding is available, the agency added.

Moody’s lowers Southcross

Moody’s Investors Service said it downgraded Southcross Energy Partners, LP’s corporate family rating to B2 from B1, probability of default to B2-PD from B1-PD and senior secured term loan rating to B2 from B1.

The outlook also was revised to negative from stable.

The company’s SGL-3 speculative grade liquidity rating also was affirmed.

Moody’s also downgraded the ratings of Southcross Holdings Borrower LP’s ratings, including its corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD from B2-PD and senior secured term loan rating to Caa1 from B2.

Southcross Holdings’ speculative grade liquidity rating also was affirmed at SGL-3.

The downgrades reflect the high financial leverage of both Southcross and Southcross Holdings, along with a challenged commodity price environment expected to restrain volume growth, Moody’s said.

The downgrades also consider the need for ongoing support from their private equity sponsors to ensure adequate liquidity and covenant compliance, the agency said.

Moody’s downgrades United Distribution

Moody's Investors Service said it downgraded United Distribution Group, Inc.'s corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD.

The company’s senior secured first-lien credit facilities also were downgraded to B3 from B2 and senior secured second-lien term loan to Caa3 from Caa2.

The downgrades reflect the recent substantial deterioration in United's operating results and credit metrics, Moody’s said, and an expectation they will remain weak over the next 12- to 18-months.

The outlook is stable.

The ratings reflect the company’s small size, high leverage, limited asset coverage, acquisitive history and significant exposure to the oil and gas and coal mining sectors, Moody’s said.

These factors are somewhat balanced by the company's market position, effective cost management and the counter-cyclical working capital needs and limited capital expenditure requirements of the distribution business model, the agency said.

S&P upgrades Alion Science

Standard & Poor's said it raised the corporate credit rating on Alion Science and Technology Corp. to B from B- and removed the rating from CreditWatch, where it was placed with positive implications in July.

The agency also said it affirmed the BB- rating on the company's proposed $40 million revolver. The recovery rating on the revolver remains at 1, indicating 90% to 100% expected default recovery.

The agency also said it affirmed the B rating on the company's $300 million first-lien term loan B. The recovery rating on the first-lien term loan B remains at 3, indicating 50% to 70% expected default recovery.

The outlook is stable.

The upgrades reflect the closing of Veritas Capital's acquisition of Alion Science and Technology for $715 million, S&P said.

As a result of the transaction, Alion's leverage improved to the mid-6x range from the mid-9x range at year-end 2014 due to about a $120 million decrease in debt outstanding compared to debt outstanding as of June 30, the agency said.

The ratings also consider the company's presence in the highly competitive government-services market and high customer concentration, S&P said.

Fitch lifts Best Buy

Fitch Ratings said it upgraded the long-term issuer default rating on Best Buy Co., Inc. to BBB- from BB.

The outlook is stable.

The upgrades reflect an expectation that management’s successful focus on higher margined products and services, coupled with expense reductions, will allow annualized EBITDA to remain at or more than $2 billion, Fitch said.

Best Buy is using its real estate assets, broad product offering and existing services infrastructure to strengthen customer relationships and capitalize on anticipated growth in the connected home business, the agency said.

Best Buy has recently experienced sales declines related to both secular trends in key categories, as well as strengthened competition from lower-priced players and online merchants, Fitch said.

The company is exposed to key categories, including computing and flat panel televisions, which have been in secular decline, the agency said.

Fitch upgrades J.C. Penney

Fitch Ratings said it upgraded the issuer default ratings of J.C. Penney Co., Inc. and J.C. Penney Corp., Inc. to B- from CCC.

The outlook is stable.

J.C. Penney has demonstrated a meaningful turnaround in its business over the last seven quarters, Fitch said.

The agency said it expects the company to generate EBITDA of about $650 million in 2015 versus $277 million in 2014, the agency said.

The upgrades also consider increased confidence in J.C. Penney’s ability to improve EBITDA to the $800 million range in 2016 and move toward $1 billion in 2017, Fitch said.

Moody’s puts Cameron on upgrade review

Moody’s Investors Service said it placed the Baa1 senior unsecured ratings of Cameron International Corp. under review for upgrade following news of a definitive agreement to be acquired by Schlumberger Ltd. in a stock and cash transaction valued at $14.8 billion.

The review for upgrade is based on the potential benefit of Cameron’s debt being supported by the stronger credit profile and greater financial flexibility of Schlumberger, Moody’s said.

Under an agreement announced Aug. 26, Cameron shareholders will receive 0.716 shares of Schlumberger common stock and a cash payment of $14.44 in exchange for each Cameron share, the agency said.

Following the transaction, the shareholders of Cameron are expected to own about 10% of the outstanding shares of Schlumberger, Moody’s said.

The review will focus on whether or not the Cameron debt is legally assumed or guaranteed by Schlumberger or its rated subsidiaries, the agency said.

S&P: Hawaiian Telcom profile to weak

Standard & Poor's said it affirmed the B corporate credit rating on Hawaiian Telcom Holdco Inc.

The outlook is stable.

The agency said it revised an assessment of the company's business risk profile to weak from vulnerable, along with the comparable rating analysis to negative from neutral.

The revision of the company’s business risk assessment reflects an improvement in the company's network capabilities since its emergence from bankruptcy in 2010, S&P said.

The company also was able to compete more effectively by diversifying its revenue mix through the addition of a fully bundled 'triple play' product, which includes pay-TV and high-speed data services, the agency said.

The company’s stable outlook incorporates an expectation for modest revenue growth over the next year, S&P said.

S&P: Mohawk liquidity is strong

Standard & Poor’s said it affirmed the BBB corporate credit rating on Mohawk Industries Inc.

The outlook is stable.

The agency also said it revised the assessments of the company’s liquidity to strong from adequate and its country risk to low from very low.

The outlook is stable, reflecting an expectation that EBITDA growth and periodic debt-financed acquisitions will keep adjusted leverage generally in the 2x- to 3x-range, S&P said.

Mohawk is expected to benefit over the next two years from recovering U.S. residential- and commercial-markets with increased sales of new and existing properties, renovation of commercial and residential rental properties and increased consumer remodeling, all of which increase demand for flooring products, the agency said.

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