Moody's slashes Sierra Enterprises

Moody's Investors Service said it downgraded Sierra Enterprises LLC's corporate family rating to Caa3 from B3, probability of default rating to Caa3-PD from B3-PD and the company's first-lien revolving credit facility and first-lien term loan to Caa2 from B3.

The downgrades reflect Moody's view that the potential for a debt restructuring, which the rating agency could consider a distressed exchange, has increased materially. Moody's believes there is a risk that the current leverage is unsustainable and is concerned that if fundamentals do not improve in sufficient time, Sierra might not be able to refinance its revolving credit facility due August 2024 and the first lien term loan maturity in November 2024 without impairing creditors or at a manageable interest cost.

“Moody's thus views default risk as growing including the potential for a distressed exchange transaction such as a discounted debt repurchase by the company or private equity sponsor Paine Schwartz Partners,” the agency said in a press release.

The outlook is negative.

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