S&P downgrades KNEL

S&P said it lowered the issuer credit rating on KNEL Acquisition LLC to B- from B.

The outlook is negative.

The agency also said it lowered the ratings on the senior secured first-lien term credit facilities to B- from B and on the senior secured second-lien term loan to CCC from CCC+.

The credit metrics on KNEL Acquisition continue to be weak, primarily a result of further executional challenges with its new Ontario facility and volume declines with top powder customers, S&P said.

Financial sponsor owner Kohlberg & Co. is contributing a $30 million equity infusion to provide liquidity as project costs have crept into 2019, the agency explained.

The company is seeking an amendment to loosen covenant testing levels and allow for greater add-backs to covenant EBITDA to maintain sufficient cushion, S&P said.

The agency said it expects the company's performance at the new facility to be challenged for at least another 12 months, leading to elevated ramp-up costs and unutilized capacity.

It is unclear whether some of the company's key customers will be able to right size their business and increase volumes with KNEL, S&P added.

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