S&P nicks KNB Holdings

S&P said it lowered its ratings for KNB Holdings Corp. and its first-lien term loan to CCC- from CCC.

“The downgrade reflects our expectation for a debt restructuring, distressed debt exchange, or bankruptcy filing because of weak liquidity and sizable near-term maturities. We believe the company's capital structure is unsustainable given its minimal EBITDA and cash flow generation. Absent a debt restructuring or capital raise, we expect the company to default. We believe KNB Holdings' liquidity is weak because its liquidity sources are insufficient to cover its cash needs over the next 12 months,” S&P said in a press release.

The agency noted KBN’s sales for the third quarter plummeted 36.7% year over year and cash needs of $94 million of supplier accounts payables, $58 million of asset-based lending borrowings coming due, roughly $30 million of interest expense, $7.4 million of first-lien term loan amortization, and up to $15 million for seasonal inventory buildup.

Additionally, the first-lien term loan is trading at less than 50 cents on the dollar.

The outlook is negative.

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