S&P downgrades Chromaflo

Standard & Poor’s said it lowered the corporate credit rating on Chromaflo Acquisition Co. LP to B- from B.

The outlook is stable.

The agency also said it lowered the rating on the first-lien senior secured facility to B- from B. The recovery rating remains at 3, indicating 50% to 70% expected default recovery.

The facility consists of a $40 million revolving credit facility due 2018 and a $330 million first-lien term loan due 2019.

S&P said it lowered the rating on the $115 million second-lien term loan due 2020 to CCC+ from B-. The 5 recovery rating on this debt is unchanged and indicates 10% to 30% expected default recovery.

The stable outlook reflects an expectation that the company will achieve and maintain satisfactory operating profitability and generate sufficient free cash flow to support a financial profile consistent with its ratings, the agency said.

The company is expected to maintain a very aggressive financial policy and pursue modest-size acquisitions and shareholder rewards, S&P added.

S&P downgrades Essar Steel

Standard & Poor’s said it lowered the long-term corporate credit rating on Essar Steel Algoma Inc. to CCC+ from B-, along with the rating on its senior secured asset-based revolving facility and term loan to B from B+.

The 1 recovery rating on the debt is unchanged, indicating 90% to 100% expected default recovery.

The agency also said it lowered the rating on the company’s senior secured notes to B- from B+ and revised its recovery rating to 2 from 1. A 2 recovery rating indicates 70% to 90% expected default recovery.

S&P also lowered the rating on the company’s junior secured notes to CCC- from CCC+ and revised the recovery rating to 6 from 5. A 6 recovery indicates 0 to 10% expected default recovery.

The downgrades follow the sharp deterioration in North American steel prices, which have declined by about 30% since late 2014, the said.

The outlook is negative.

Excess industry capacity, soft demand and relative U.S.-dollar strength are key contributors to the price weakness, which is showing no signs of abating in the near term, S&P said.

Based on the company’s modest cash position and credit availability, the agency said it believes Essar will have limited flexibility to fund its operations over the next 12 months absent an improvement in steel prices from current depressed levels.

The company is vulnerable and dependent on favorable business, financial and economic conditions to meet its financial commitments over the next 12 months, which is consistent with the agency’s criteria for CCC+ ratings, S&P added.

DBRS downgrades Armtec

DBRS said it downgraded the issuer rating of Armtec Holdings Ltd. to SD (selective default) from CC and its senior unsecured debt rating to D (default) from C.

Both ratings were removed from under review with negative implications, DBRS said.

At the same time, the agency said it discontinued the recovery rating of RR6 on the senior unsecured debt.

The downgrades follow Armtec’s non-payment of interest on its unsecured debt obligations at the end of the 30-day grace period following the March 22 due date, DBRS said.

Armtec has not defaulted on its credit facilities, which were extended to May 11, the agency said, or on its senior secured notes, which have obtained covenant waiver from lenders until the same day.

DBRS added that the payment default on the senior unsecured debt will not trigger the cross-default provisions of the credit facilities.

The issuer rating will be changed to D in the event that Armtec is unable to repay or refinance the senior secured debt by May 11, the agency said.

S&P lowers Fortescue Metals

Standard & Poor’s said it lowered the corporate credit rating on Fortescue Metals Group Ltd. to BB from BB+.

The outlook is negative.

The agency also said it lowered the ratings on the company’s senior secured debt to BBB- from BBB and the senior unsecured rating to BB- from BB.

The recovery rating is unchanged at 1 for the senior secured debt rating and 5L for the senior unsecured debt.

All of the ratings were removed from CreditWatch with negative implications, S&P said.

The downgrades reflect an expectation that Fortescue’s financial-risk profile will weaken significantly in the next two years due to low iron ore prices, the agency said.

The company’s adjusted debt-to-EBITDA is now expected to approach 4.5x in the years ending June 30, 2015 and 2016 under the base-case iron ore price assumptions, S&P said.

But, the agency added that it expects reduced freight- and production-costs to mitigate the impact of lower prices.

The company’s ability to reduce costs is key to generating a positive cash margin amid lower iron ore prices and to achieving credit metrics in line with the BB rating, S&P said.

Fitch: Fortescue notes BBB-

Fitch Ratings said it assigned an expected BBB- rating to FMG Resources (August 2006) Pty Ltd.’s proposed $1.5 billion guaranteed senior secured notes due in 2022.

The facility is guaranteed by Fortescue Metals Group Ltd. and its subsidiaries that currently represent 97% of the group’s consolidated assets and 97% of its net income, Fitch said.

The rating on the secured facility is notched-up a level from Fortescue’s BB+ long-term issuer default rating to reflect additional provision of quality collateral, including mining tenements, the agency said.

If the proposed notes are issued, Fortescue’s overall secured debt will increase to $6.8 billion, Fitch said.

But, the agency said it does not believe this level of secured debt will impair Fortescue’s senior unsecured creditors.

The proposed notes will be primarily used to refinance Fortescue’s senior unsecured debt maturing in 2017 and 2018. This will push back a bulk of the company’s debt maturities to 2019, 2021 and 2022, Fitch said.

Fortescue has limited business diversification compared with its higher-rated international peers. It has only one product – iron ore, which it sells predominantly in the Chinese market, the agency said.

S&P downgrades McJunkin

Standard & Poor’s said it lowered the corporate credit rating on McJunkin Red Man Corp. to B+ from BB-.

The agency also said it lowered the rating on the company’s senior secured term loan to B+ from BB-.

The recovery rating is unchanged at 4, indicating 30% to 50% expected default recovery..

The outlook is stable.

The downgrade reflects a view that McJunkin’s credit measures will remain more in line with expectations for a B+ rating rather than BB-, S&P said.

The stable outlook reflects an expectation that the company’s large presence in the North American energy market and expanding international presence will generate enough cash flow to support, on a sustained basis, debt-to-EBITDA of between 4x and 5x debt, the agency said.

S&P downgrades Sabine Oil

Standard & Poor’s said it lowered the corporate credit on Sabine Oil & Gas Corp. to D from CCC, along with the ratings on the company’s first-lien credit facility to D from B-, second-lien debt to D from CCC- and unsecured notes to D from CC.

The D ratings reflect the missed interest payment on the company’s second-lien term loan due 2018, S&P said.

The recovery rating on the company’s first-lien credit facility remains at 1 and its unsecured notes at 6. The recovery rating on the second-lien debt is 5.

The downgrades reflect the company’s decision not to pay about $15.3 million in interest due April 21 on its second-lien term loan, S&P said.

The company entered into a 30-day grace period during which it could make the interest payment, the agency said. If the company does not make the interest payment before the end of the grace period, a default would occur.

Sabine has retained financial advisors to direct the company on strategic alternatives related to its capital structure, S&P added.

Moody’s cuts Select Medical to SGL-3

Moody's Investors Service said it confirmed the ratings of Select Medical Holdings Corp. and its wholly owned subsidiary Select Medical Corp., including the B1 corporate family rating and B1-PD probability of default rating.

The speculative grade liquidity rating was lowered to SGL-3 from SGL-2.

The outlook is stable. The actions conclude the review for downgrade initiated on March 24.

Moody’s said the lowering of the speculative grade liquidity rating reflects a weakening of Select Medical's liquidity position through the reduction in available revolver following the expected draw to fund the equity contribution to the joint venture, the upcoming maturity of about $285 million of term loan in December 2016 and the pressure on free cash flow over the next year from spending to achieve the planned synergies.

S&P downgrades Warren

Standard & Poor’s said it lowered the corporate credit rating on Warren Resources Inc. to CCC+ from B-.

The agency also said it lowered the ratings on the company’s senior unsecured debt to CCC- from CCC+. The recovery rating on the debt also was revised to 6 from 5, indicating 0 to 10% expected default recovery.

The outlook is negative.

The downgrades reflect the reduced oil- and natural-gas price assumptions, which are expected to lead to much weaker earnings and credit measures for Warren in 2015 and 2016, S&P said.

Warren’s adjusted funds from operations-to-debt ratio is now expected to drop to the low- to mid-single-digit percentage range in 2015, the agency said.

But, the company’s management is expected to remain proactive in preserving its liquidity position, potentially through asset sales or other capital-raising measures, S&P said.

S&P upgrades Peugeot

Standard & Poor’s said it raised the long-term corporate credit ratings on Peugeot SA and related entity, GIE PSA Tresorerie, to BB- from B+.

The outlook is positive.

The agency also said it affirmed a B short-term corporate credit ratings on Peugeot and GIE PSA Tresorerie, and raised the rating on the senior unsecured notes to BB- from B+.

The recovery rating on these notes is 4, indicating 30% to 50% expected default recovery.

The upgrade reflects a view that Peugeot’s decreased debt and successful restructuring of the automotive division should enable it to achieve higher credit ratios, despite eroding market share, S&P said.

The group’s earnings generation will benefit from numerous cost-cutting initiatives that the company has implemented in the automotive division, as well as the euro’s recent depreciation, the agency said.

In addition, the automotive division could receive a payment of €1.5 billion spread over 2015 to 2018, thanks to the partnership of Peugeot’s captive finance subsidiary, Banque PSA Finance and Santander.

Beyond 2015, Peugeot could also exercise warrants that its shareholders received during the 2014 capital increase, which could lead to an additional cash inflow of about €800 million, although the timing of such an exercise is uncertain, S&P said.

Future cash-flow generation may constrain the ratings, the agency added.

S&P upgrades Venoco

Standard & Poor’s said it raised the corporate credit rating on Venoco Inc. to CCC+ from SD (selective default), along with the ratings on its senior unsecured notes to CCC- from D.

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

The outlook is negative.

The agency also said it affirmed the ratings on parent company Denver Parent Corp., including its CCC+ corporate credit rating and CCC- unsecured issue-rating. The ratings also were removed from CreditWatch, where they were placed with negative implications April 3, S&P said.

The outlook on Denver Parent was revised to negative from stable.

The upgrades follow a review of Venoco’s credit profile in conjunction with the release of its year-end 2014 financial results, the agency said, and the completion of the exchange of its senior unsecured notes whereby existing investors received new second-lien notes at 77½% of par value.

The exchange is viewed as tantamount to default because investors received less than the promise of the original securities, S&P said.

Concurrent with the exchange, Venoco issued $175 million of first-lien notes and entered into $75 million of cash-secured senior term loans. The company’s senior secured credit facility was subsequently terminated.

The recovery rating of 6 on Venoco’s senior unsecured notes considers the increase in secured debt ahead of the notes in the capital structure, the agency said.

With the issuance of the first-lien notes and cash-secured term loan, the company has an improved liquidity, which is now considered adequate, S&P said.

The agency said it expects sources will exceed uses by more than 1.2x at least over the next 12 months even if EBITDA declines by 15%.

The outlook is negative, reflecting a view that Venoco might pursue additional debt exchanges in which investors receive less than what was promised on the original securities, S&P said.

Fitch: Teva on watch after merger news

Fitch Ratings said it placed Teva Pharmaceutical Industries Ltd.’s BBB+ long-term issuer default rating on Rating Watch negative, along with the ratings on its subsidiaries.

The actions follow Teva’s unsolicited proposal to acquire Mylan NV for $82 per share, or about $40 billion, Fitch said.

The company is expected to use 50% cash and 50% stock funding for the deal, which will require significant new borrowings, possibly pushing its pro forma gross debt-to-EBITDA ratio to 4x, likely outside the current BBB+ ratings, the agency said.

Fitch said it estimates the offer price represents a transaction multiple of about 14 times forecasted Mylan 2015 EBITDA.

The offer is contingent on Mylan not engaging in other mergers and acquisitions, including its $29 billion bid for Perrigo plc.

If successful, the Teva/Mylan merger would boost Teva’s position as the largest generic drug-maker in the world, Fitch said.

Available synergies are likely greater than Teva’s initial $2 billion estimate and would provide further margin enhancement opportunities on top of Teva’s current restructuring programs, the agency said.

S&P: Teva on watch after Mylan deal announced

Standard & Poor’s said it placed the A- corporate credit rating on Teva Pharmaceutical Industries Ltd. on CreditWatch with negative implications following its offer to acquire Mylan Inc. for about $40 billion.

All of the company’s ratings were included in the negative watch as the acquisition is expected to be funded with equal amounts of debt and equity, S&P said.

A potential acquisition of Mylan would strengthen Teva’s position in the core generic pharmaceutical business, adding additional size and scale, pipeline depth and increased geographic penetration, the agency said.

The addition of Mylan also would help offset the looming loss of sales, EBITDA and cash flows from Copaxone, a high-margin multiple sclerosis treatment, as a result of generic competition in late 2015, S&P added.

However, the acquisition also would significantly increase debt leverage beyond expectations within the current modest financial risk profile assessment on Teva, the agency said.

Management has had a track record of effectively integrating large acquisitions in the generic drug industry and rapidly de-levering following acquisition-induced spikes in leverage, S&P said.

But the potential for a ratings downgrade exists given the agency’s projection that leverage may exceed 3.5x following the acquisition, the uncertainty of realized synergies and pace of de-levering, along with the uncertain level of strategic benefits and the possibility of needed divestitures mandated by regulators, S&P said.

S&P: J.C. Penney to positive

Standard & Poor’s said it revised the outlook on J.C. Penney Co. Inc. to positive from stable.

The agency also said it affirmed all of its ratings, including its CCC+ corporate credit rating, on the company.

The outlook revision reflects a forecast for further modest gains over the next year, S&P said.

There is a one-third chance that adjusted EBITDA will approach about $1 billion, which is one indication that the company’s capital structure would be sustainable, the agency said.

Other metrics supporting an upgrade include prospects for breakeven or better cash flow after capital spending of at least $250 million, prospects for further meaningful reductions in legacy selling, general and administrative cost levels, S&P said, and success in online initiatives and the home furnishings segment.

S&P rates Acosta loan B

Standard & Poor’s said it assigned a B rating and 3 recovery rating on Acosta Inc.’s new $2.06 billion term loan B-1.

The 3 recovery rating indicates 50% to 70% expected default recovery.

The new term loan B-1 will replace the company’s existing term loan B at a lower interest rate, S&P said.

The company also plans to reduce pricing on its revolver, the agency said.

Other than the proposed reduced pricing and a 12-month soft call extension, the terms of the new loan are substantially the same as the existing loan, S&P said.

All of the other ratings on the company, including its B corporate credit rating, are unchanged.

The ratings reflect Acosta’s significant debt burden and financial-sponsor ownership, S&P said.

Credit metrics are expected to remain very weak and the company’s financial policy will remain aggressive, the agency said.

S&P rates Jill Holdings loan B

Standard & Poor’s said it affirmed the B corporate credit rating on Jill Holdings LLC.

The agency also said it assigned a B rating to Jill’s $250 million proposed term loan. The recovery rating is 3, indicating 50% to 70% expected default recovery.

The outlook is stable.

Upon close of the transaction, the agency said it will withdraw ratings on Jill Holdings’ existing $120 million term loan due 2017.

S&P said it expects it will be repaid in conjunction with the purchase of the company by financial sponsor, TowerBrook Capital Partners.

The ratings reflect a view that the company’s improved profitability and credit metrics are sustainable over the next 12 months, the agency said.

Following the TowerBrook purchase, S&P said it expects continued margin improvement to offset modest incremental leverage, resulting in credit measures that are at or near current levels with a debt-to-EBITDA ratio in the 5x range.

Moody’s rates MJ Acquisition loans Ba3, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to MJ Acquisition Corp., the joint venture formed by Select Medical Corp. and Welsh, Carson, Anderson & Stowe to complete the acquisition of Concentra Inc. from Humana.

The agency also assigned a Ba3 rating to the company's first-lien senior secured credit facility and a Caa1 rating to its second-lien senior secured term loan.

The outlook is stable.

Proceeds, along with $435 million of contributions from the equity partners, will be used to fund the $1,055,000,000 acquisition of Concentra from Humana. Moody's expects MJ Acquisition will be merged into Concentra in conjunction with the transaction and that Concentra will be the surviving borrower.

Moody’s drops Advanced Micro, notes

Moody's Investors Service said it lowered Advanced Micro Devices, Inc.'s corporate family rating to B3 from B2 and the ratings on the senior unsecured notes to Caa1 from B2.

The speculative grade liquidity rating was affirmed at SGL-2.

The outlook was changed to negative from stable.

Moody’s said the downgrade reflects Advanced Micro’s prospects for operating losses over the next year and negative free cash flow, in contrast to our previous expectations of modest profitability and positive free cash flow.

The agency’s performance outlook for Advanced Micro is driven by ongoing revenue declines and operating losses in its PC-related business (microprocessors and graphics chips) that will more than offset the expected profitability (albeit lower than last year) in the company's embedded and semi-custom chip business, which makes up roughly half of revenue.

"Weak demand conditions in the personal computer space, particularly in the desktop and lower end segments, will persist over the next few quarters," Moody's Richard Lane said in a news release.

Combined with efforts to reduce channel inventory ahead of Microsoft's launch of the Windows 10 operating system this summer, Moody's expects "AMD will continue to lose money in this shrinking part of the business," Lane added in the release.

Moody’s could lift Associated Estates

Moody's Investors Service said it placed Associated Estates Realty Corp.’s Baa3 senior unsecured debt rating on review for upgrade.

The review reflects the April 22 announcement that Associated Estates' board of directors approved a definitive merger agreement under which a real estate fund managed by Brookfield Asset Management (Baa2, stable) will acquire all of Associated Estates' outstanding common stock.

This is a cash transaction valued at $2.5 billion, including the assumption of debt. Moody's noted that Brookfield announced a $1.1 billion common equity offering on April 20. The transaction is expected to close in the second half of 2015 and Associated Estates' headquarters will remain in Richmond Heights, Ohio.

Moody’s assigns Ba3 to Ineos notes

Moody's Investors Service said it assigned a Ba3 rating to the proposed €770 million senior secured guaranteed notes to be issued by Ineos Finance plc, a subsidiary of Ineos Group Holdings SA, to refinance its existing $775 million 7½% senior secured notes due 2020 (rated Ba3).

The transaction is contingent on the repayment of the senior secured notes maturing in 2020.

Concurrently, the agency affirmed Ineos' B1 corporate family rating, B1-PD probability of default rating, the Ba3 ratings on its senior secured term loans, as well as the B3 ratings on its senior unsecured bonds.

The outlook on all ratings remains stable.

Upon completion of refinancing, Moody's will withdraw the Ba3 rating on existing senior secured notes due 2020.

S&P: Concentra loans BB-, B-

Standard & Poor’s said it assigned a B+ corporate credit rating to Concentra Inc., along with a BB- rating on a proposed $500 million first-lien secured credit facility with a recovery rating of 2.

The 2 recovery rating indicates 70% to 90% expected default recovery.

The facility consists of a $50 million revolving credit facility due 2020 and a $450 million term loan due 2022, the agency said.

S&P also said it assigned a B- rating to the company’s proposed $200 million second-lien secured credit facilities with a recovery rating of 6, indicating 0 to 10% expected default recovery.

The outlook is negative.

Select and Welsh Carson will use the proceeds of the new debt, along with contributed equity, to purchase Concentra Inc., S&P said.

The ratings reflect the company’s narrow focus in a highly fragmented and competitive industry of occupational-based health services, some integration risk related to the transaction and cyclical demand dynamics, the agency said.

These risks are partially offset by the company’s geographic diversity and relatively low exposure to government payors, S&P said.

Moody’s drops Emmis, facilities to B3

Moody's Investors Service said it downgraded Emmis Operating Co.’s corporate family rating to B3 from B2 due to the expected decline in revenue from the company's KPWR-FM station in Los Angeles as a result of a new direct competitor to this station and the loss of key talent to the competitor.

The agency also downgraded the senior secured credit facilities to B3 from B2, the probability of default rating to Caa1-PD from B3-PD and the speculative grade liquidity rating to SGL-3 from SGL-2.

The outlook is stable.

On April 21, Emmis announced plans to amend its credit agreement to include the relaxation of its total leverage maintenance covenants through Feb. 28, 2017, which will provide an acceptable EBITDA cushion over this period absent greater than expected revenue losses in Los Angeles or other key markets.

S&P: KNEL unchanged after increased add-on

Standard & Poor’s said the ratings on KNEL Acquisition LLC are unchanged following the company’s $10 million proposed increase to its previously announced $50 million add-on to its existing $125 million term loan A-1 due in 2021.

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

The proceeds, as well as cash on the balance sheet, will be used to fund the acquisition of certain production assets, inventories and contracts associated with NBTY Inc.’s nutritional bar and powder-manufacturing operations, S&P said.

The company’s weak business risk profile reflects KNEL’s customer concentration, participation in the fragmented co-manufacturing segment of the highly competitive North American packaged-food industry and narrow product focus, the agency said.

S&P said it believes leverage will remain at more than 6x during the next 12 months, but credit-protection measures will improve with excess cash flow applied to debt reduction.

Moody’s gives eResearch loans B2

Moody's Investors Service said it confirmed eResearch Technology, Inc.'s ratings, including the B2 corporate family rating, B2-PD probability of default rating and B1 senior secured first-lien bank debt ratings.

The agency also assigned B2 ratings to eResearch’s proposed senior secured revolving credit facility due 2021 and term loan due 2022.

The outlook was revised to stable. These actions conclude the review initiated on March 3.

On Feb. 27, eResearch announced it plans to purchase PHT Corp., a provider of technology solutions for clinical research programs. Proceeds from the proposed senior secured credit facilities and cash will be used to purchase PHT, refinance existing debt and pay related fees and expenses.

Ratings on the existing senior secured first-lien revolving credit facility due 2017 and term loan due 2018 will be withdrawn when they are repaid.

S&P rates Blackstone notes A+

Standard & Poor’s said it assigned an A+ rating to Blackstone Holdings Finance Co. LLC’s proposed senior unsecured notes due 2045.

The size of the offering has not been finalized and will be subject to market conditions, but the agency said it assumed the amount will be no more than $500 million and no less than $400 million.

The notes will be fully and unconditionally guaranteed on a joint and several basis by the Blackstone Group LP, Blackstone Holdings I LP, Blackstone Holdings II LP, Blackstone Holdings III LP and Blackstone Holdings IV LP.

The long-term issuer credit rating on Blackstone Group LP is A+ and the outlook is stable.

The group’s management expects to use the majority of the proceeds to seed new strategies and grow existing businesses, S&P said.

Pro forma for this transaction, assuming the amount of the new issuance is $500 million, S&P said it expects total debt-to-adjusted EBITDA will remain at less than 1.5x.

The ratings reflect the group’s strong business risk profile because of its solid market position within the global alternative asset-management industry and significant diversification within its business lines, the agency said.

The stable outlook considers an expectation that the company will maintain its leading market position and favorable reputation among alternative asset managers, S&P added.

Fitch rates Harris notes BBB-

Fitch Ratings said it assigned an expected rating of BBB- to Harris Corp.’s proposed senior unsecured notes.

Harris plans to issue $2.4 billion of senior unsecured notes with various maturities, the agency said.

The proposed notes will rank equally with the company’s existing unsecured indebtedness, Fitch said.

The company has and issuer default rating of BBB-, senior unsecured revolving credit facility rating of BBB-, senior unsecured three- and five-year term loans rating of BBB-, senior unsecured notes and debentures rating of BBB-, short-term issuer default rating of F3 and commercial-paper rating of F3.

The outlook is stable.

The majority of the proceeds from the proposed notes will be used to fund the acquisition of Exelis Inc., which was announced in February.

The company also may use some proceeds to redeem certain currently outstanding senior unsecured notes, the agency said.

The ratings are supported by the company’s competitive position in the defense industry; technology capability, sizable international and commercial sales, good product diversification and adequate liquidity, the agency said.

Despite an elevated post-acquisition leverage for Harris, Fitch said it believes the company will have an investment grade profile due to strong cash generation, solid financial flexibility, strong margins and technological advantages compared to some of its peers.

Moody’s gives Harris notes, loan Baa3

Moody's Investors Service said it assigned Baa3 ratings to Harris Corp.’s $2.4 billion senior unsecured notes and $1.3 billion senior unsecured term loan facility.

The outlook is negative.

The new debt will help finance the company's acquisition of Exelis, Inc.

Moody’s said the Baa3 senior unsecured rating reflects leverage metrics at the weaker end compared to other, similarly rated companies. Expectation of annual free cash flow of around $650 million to $700 million, restraint with respect to acquisition activity and willingness to divest and use proceeds to supplement funds for debt prepayment add support, the agency said.

S&P rates Spirit AeroSystems loan BBB-

Standard & Poor’s said it assigned an unsolicited BBB- rating to Spirit AeroSystems Inc.’s $535 million term loan A due 2020 with an unsolicited recovery rating of 1, indicating 90% to 100% expected default recovery.

The agency also said it raised the rating on the company’s unsecured debt to BB from BB- and revised the recovery rating to 4 from 5, indicating 30% to 50% expected default recovery.

The issue-level and recovery ratings on Spirit’s $650 million revolver are unchanged.

The proceeds from the new term loan A will be used to pay off the company’s existing term loan B, S&P said.

The proposed transaction is not expected to significantly alter the company’s credit metrics and the other ratings on the company are unchanged, the agency said.

The upgrade of the rating on Spirit’s unsecured debt reflects improved recovery prospects caused by the decline in the amount of secured debt that the company would have at default due to the higher amortization on the new term loan A, S&P said.

The ratings reflect the company’s position as the largest independent supplier of aircraft structures, its improving profitability and cash flow and the strong commercial aerospace market, the agency said.

But the commercial aerospace market is competitive and cyclical and the company still needs to address key uncertainties, including profitably increasing production on the Airbus A350 program and extending its pricing agreement with Boeing, its largest customer, past the end of 2015, S&P said.

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