S&P puts Adler Real Estate on watch

S&P said it put the ratings for Adler Real Estate AG on CreditWatch with positive implications on ADO Properties’ tender for all of Adler’s shares.

“The CreditWatch reflects the possibility that we could consider upgrading Adler by up to one notch if the transaction with ADO is completed and in line with our view of the stronger credit quality of the combined entity,” said S&P in a press release.

The agency said it believes the combined entity would benefit from a better financial profile, with lower leverage including debt to debt plus equity of close to 50% compared with Adler’s current stand-alone debt to debt plus equity of about 67% as of Sept. 30. S&P expects EBITDA interest coverage at the combined entity of 2.5x-2.7x for the next 12 months, which exceeds Adler’s current stand-alone ratio of only 1.9x as of Sept. 30.

S&P shifts Consolidated Energy view to negative

S&P said it revised the outlook for Consolidated Energy Ltd. to negative from stable and affirmed its BB ratings.

“The negative outlook reflects our view that the decrease in methanol prices and operational setbacks at the Natgasoline plant’s ramp-up could erode the credit metrics. The U.S.-based plant had an unplanned outage of its waste heat boilers, resulting in a lower-than-expected production. These factors reduced the company’s revenue and EBITDA, raising debt to EBITDA above 6x in 2019,” said S&P in a press release.

The agency expects Consolidated’s credit metrics to gradually recover next year, citing a gradual rebound in prices and the Natgasoline plant’s ongoing output increase.

However, S&P thinks deleveraging will take longer than it had expected resulting in a debt to EBITDA of more than 4x in the next 12 months.

S&P revises Consus view to positive

S&P revised the view for Consus Real Estate to positive from stable on news ADO Properties Ltd. acquired a stake in the company.

“The outlook revision follows ADO’s announcement that it was acquiring a 22.18% strategic stake in Consus for €9.72 per share including a premium of about 58% to the latest share price of €6.15. Moreover, we understand that ADO has a call option for an additional 51% stake in Consus, currently owned by Consus’ largest shareholder, Aggregate. If ADO exercises the call option, it would become Consus’ majority shareholder with over 70% of the shares, and therefore take control of Consus,” said S&P in a press release.

The positive outlook mirrors S&P’s view Consus’ creditworthiness could improve if ADO acquires another 51% of Consus’ share capital and takes control of the company within the next 18 months (the timeframe to exercise the call option).

S&P affirmed the company’s B rating and the B- rating on Consus’ notes.

Fitch shifts Meritage view to positive

Fitch Ratings affirmed the ratings of Meritage Homes Corp., including the company’s long-term issuer default rating at BB and revised the outlook to positive from stable.

The BB rating and positive outlook incorporate the company’s improving leverage levels and the shift toward the first-time/entry-level buyer segment, which is positioned better for the latter part of this upcycle. Net debt to capitalization was 33.3% (excluding cash classified by Fitch as not readily available for working capital purposes of $75 million) at the end of the third quarter of 2019 (3Q19). Fitch expects net debt to capitalization to remain in the mid-30% range during the rating horizon, below the positive rating sensitivity of this ratio sustaining below 40%.

Moody’s reviews WPX Energy for upgrade

Moody’s Investors Service said it placed the ratings of WPX Energy, Inc. under review for upgrade following the announcement that it entered an agreement to acquire Felix Energy (unrated). The purchase price is $2.5 billion, consisting of $900 million in cash and $1.6 billion in stock issued to the seller. WPX will not assume any debt as part of the transaction. Moody’s also upgraded WPX’s speculative grade liquidity rating to SGL-1 from SGL-2.

“The ratings review for upgrade reflects Moody’s expectation that the Felix Energy acquisition will positively impact WPX’s asset profile, increase its scale, boost its profit margins and contribute to positive free cash flow in 2020,” the agency said in a press release.

The purchase will expand the company’s scale and position in the Delaware basin, increasing its production by 60 Mboe/d, or 33 percent, and inventory locations by about 1,500. On a pro forma basis, WPX will have 184,000 net acres and 240.5 Mboe/d of production in the Permian Basin.

“The funding of the $2.5 billion purchase price with almost two-thirds equity keeps the transaction largely leverage neutral and WPX will not assume any debt with the acquisition,” Moody’s said. The seller will own about 153 million WPX shares (27 percent of total outstanding shares) and hold two seats on the board of directors.

S&P: Sunrise Communications view to stable

S&P said it revised the outlook for Sunrise Communications to stable from negative after the company cancelled its proposed acquisition of UPC Switzerland and will incur CHF 120 million to CHF 125 million of expenses and penalties.

“As a result, instead of a material increase in leverage, we now expect Sunrise’s S&P Global Ratings-adjusted debt to EBITDA will rise to 3.2x in 2019, before improving to, or below, 3x in 2020-2021 (excluding one-off costs),” said S&P in a press release.

S&P affirmed Sunrise’s BBB- rating.

Moody’s assigns Altura notes (P) Caa1

Moody’s Investors Service said it assigned a provisional or (P) Caa1 corporate family rating to Altura Mining Ltd. and a (P)Caa1 to the proposed senior secured notes to be issued by Altura Lithium Operations Pty Ltd. and guaranteed by Altura. The rating outlook is stable. Moody’s issues provisional ratings in advance of the final sale of securities.

The company’s production of high-grade lithium concentrate, extensive mine life and mining operations in a politically stable mining region supports Altura’s credit profile.

“With regard to governance risks, Altura has concentrated company ownership. Financial policy outcomes have also not been supportive of creditor interests, being characterized by weak liquidity and repeated breaches of financial covenants,” Moody’s said in a press release.

The outlook is stable.

S&P revises recovery on HC2 notes

S&P said it affirmed its B- rating on HC2 Holdings Inc.’s $470 million senior notes due 2021 and revised the recovery rating to 3 from 4, indicating an expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default. The rating action reflects our revision of the company’s enterprise value in our discreet asset valuation approach.

“Our ratings on holding company HC2 reflect the company’s asset mix, which consists mostly of unlisted companies, and weak asset diversity due to the concentration of the portfolio in a few assets with a weak overall credit quality. In addition, we believe the company will remain highly leveraged,” the agency said in a press release.

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