S&P elevates Target Hospitality

S&P upgraded the ratings for Target Hospitality Corp., to a B+ from B for an issuer credit rating and a BB- from B on the company’s senior secured notes issued by Arrow BidCo LLC.

The specialty rental and hospitality provider completed a partial tender offer to redeem $125 million of its outstanding $340 million 9½% senior secured notes with cash on the balance sheet.

Pro forma leverage is 0.9x.

The outlook is positive, reflecting a potential raise in Target’s ratings if the company sustains business momentum and increases its revenue visibility in fiscal year 2024 and beyond while maintaining leverage below 3x.

The agency noted that Target has reduced its exposure to the volatile upstream oil and gas industry from 78% in 2018 to 28% in 2022. The company has been diversifying away from the oil and gas sector, improving business momentum.

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