Moody’s: KLX view to negative

Moody’s Investors Service said it changed the outlook for the debt of KLX Inc. to negative from stable.

The agency also said it affirmed the company’s ratings, including its Ba2 corporate family rating, Ba2-PD probability of default rating, SGL-2 speculative grade liquidity rating, along with the Ba3 (LGD 4) rating on its $1.2 billion senior unsecured notes due 2022 and Baa3 (LGD 1) rating on its $500 million senior secured revolving credit facility due 2019.

The negative outlook reflects an expectation that the lower oil price environment will lead to margin and earnings pressure, which will result in a weakening of KLX’s credit profile for the balance of this year and into 2016, Moody’s said.

Material anticipated cutbacks in capital expenditures from U.S. shale oil producers, coupled with dramatic reductions in rig count, will result in significant pricing and utilization pressure, the agency said, which will compress margins and constrain cash flows over the coming periods.

Pricing pressure is expected to persist into at least early 2016 before moderating, Moody’s added.

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