S&P cuts Bluestem

S&P said it downgraded the ratings on Bluestem Brands Inc. and its term loan to CCC- from CCC. The 4 recovery rating remains unchanged, indicating the expectation for average (30%-50%; rounded estimate: 45%) recovery in the event of a default.

“Bluestem’s revolver and term loan are due this year and we believe the likelihood that the company will undertake a restructuring in the near term has increased. The company’s $200 million asset-based lending (ABL) facility matures in July and its term loan (roughly $400 million outstanding) comes due on Nov. 7, 2020. In our view, Bluestem does not have a clear refinancing plan and we believe it is increasingly likely that the company will pursue a holistic debt restructuring to address its maturities given its weak operating performance,” said S&P in a press release.

The outlook is negative.

Moody's trims National Mentor,

Moody's Investors Service said it downgraded the ratings on National Mentor Holdings, Inc.'s first-lien senior secured revolving credit facility and first-lien term loans to B2 from B1. National Mentor's B2 corporate family rating and B2-PD probability of default rating were affirmed. The outlook remains stable.

National Mentor Holdings, Inc. plans to issue a new $205 million first-lien term loan which will be fungible to the existing first-lien term loans. Proceeds will be used to repay its unrated $200 million second-lien term loan in full.

The downgrade of the company's first-lien senior secured credit facilities reflects the elimination of a layer of loss absorption provided by the $200 million second-lien term loan. The first-lien senior secured credit facilities will represent the majority of the company's obligations following the proposed transaction.

The affirmation of the B2 corporate family rating reflects Moody's expectations the company's leverage will remain moderately high and its financial policies will remain aggressive.

Moody's downgrades Pyxus

Moody's Investors Service said it downgraded Pyxus International, Inc.'s corporate family rating to Caa2 from Caa1 and its probability of default rating to Caa2-PD from Caa1-PD. Moody's also downgraded the company's second-lien notes to Ca from Caa2.

“The downgrade reflects the company's weakening liquidity and continued delay in monetizing a portion of its FIGR business (cannabis), proceeds of which were expected to repay debt. Absent this monetization, Moody's now expects debt/EBITDA to exceed 11 times by March 2020, making it increasingly difficult for the company to address its upcoming large debt maturities. Moreover, the downgrade of the second-lien notes also considers the potential for a distressed exchange to materially impact their loss given default,” said Moody’s in a press release.

However, Moody's affirmed the company's ABL revolving credit facility at Ba3 and the company's first-lien notes at B2. Pyxus' speculative grade liquidity rating remains at SGL-4. The outlook is negative.

S&P ups Cogeco Communications

S&P said it upgraded all of Cogeco Communications (USA) Inc.’s ratings by one notch, including the issuer credit rating to BB from BB-. The company does business as Atlantic Broadband.

The upgrade is attributed to the company’s increased strategic importance to its parent Cogeco Communications Inc., raising the likelihood of support in times of stress, S&P said.

The outlook is stable.

Moody's upgrades SolarWinds

Moody's Investors Service said it upgraded SolarWinds Holdings, Inc.'s corporate family rating to B1 from B2 and upgraded its probability of default rating to B1-PD from B2-PD. Moody's also affirmed the B1 ratings on SolarWinds' senior secured bank credit facilities. The SGL-1 speculative grade liquidity ("SGL") rating remains unchanged. The outlook is stable.

The upgrade to B1 reflects Moody's expectation for SolarWinds' continued strong EBITDA growth and free cash flow generation, which has enabled the company to de-lever over the last 12 months. SolarWinds has reduced leverage to about 5x for the last 12 months ended Sept. 30 from about 5.7x in the year-ago period. Moody's said it expects leverage and cash flow will continue to improve over the next 12 to 18 months, to levels further supportive of the B1 CFR.

S&P puts Era notes on watch, view to stable

S&P said it placed Era Group Inc.’s B- issue-level rating on Era's 7¾% senior unsecured notes due 2022 on CreditWatch with positive implications given the likelihood it will upwardly revise the recovery rating to 2 from 3 once the company completes its merger with Bristow Group in an all-stock deal.

“The deal will improve Era's scale in the U.S. Gulf of Mexico and expand its presence globally in markets like the U.K., Norway and Nigeria, while also providing some diversification with the addition of Bristow's U.K. search and rescue (SAR) contract,” S&P said in a press release.

The agency affirmed its B- issuer credit rating on Era and revised the outlook to stable from negative. “The stable outlook reflects our view that Era's leverage metrics will show a modest improvement over the next 12 months as the company integrates Bristow and meaningfully expands its geographic foothold outside of the U.S.,” S&P said.

S&P puts BorgWarner on watch

S&P said it placed its ratings on BorgWarner Inc. including the BBB+ issue-level ratings on the company’s unsecured debt on CreditWatch with negative implications. The placement follows the company’s announcement it plans to acquire Delphi Technologies plc in an all-stock transaction for about $3.3 billion.

“The CreditWatch placement reflects our view that the size and timing of BorgWarner's planned $3.3 billion acquisition of Delphi Technologies may indicate a shift toward a more aggressive financial policy than we expected, reducing the cushion in its credit metrics for underperformance,” said S&P in a press release.

S&P said it will meet with management to discuss the transaction in detail with a focus on profitability and cash flow generation of the combined entity, future acquisition strategy, synergy timelines and financial policy.

Moody’s shifts Givaudan view to negative

Moody’s Investors Service said it changed the outlook for Givaudan SA to negative from stable and affirmed its Baa1 rating.

The outlook revision to negative from stable reflects Moody's expectation the string of bolt-on acquisitions announced by Givaudan since taking over Naturex in 2018 will leave its leverage metrics weakly positioned in the next 12-18 months and delay the deleveraging required to underpin its rating at the Baa1 level, the agency said.

“An outlook stabilization would, therefore, be predicated on Givaudan's ability and willingness to use future free cash flow after capex and dividends (FCF) to bring back Moody's-adjusted total debt to EBITDA below 3x and retained cash flow (RCF) to net debt in the high teens in percentage terms during the course of 2021,” Moody’s said in a press release.

S&P rates AutoCanada notes B-, view to stable

S&P said it assigned its B- issue-level and 5 recovery ratings to AutoCanada Inc.’s proposed C$125 million of unsecured notes. Proceeds along with drawings under its amended and extended revolving credit facilities, will be used to redeem its C$150 million of unsecured notes due 2021. Concurrent with the refinancing, AutoCanada plans to downsize its revolver to C$175 million from C$250 million and extend the facility’s maturity to 2023.

S&P also revised the company’s outlook to stable from negative and affirmed the B issuer rating.

“The stable outlook reflects our expectation that the proposed refinancing transaction should reduce refinancing risks by meaningfully extending its maturity profile. The outlook also reflects our expectation that credit measures should strengthen over the next couple of years, mainly as the company executes on initiatives to improve its cost profile and deploys positive discretionary cash flow primarily to repay debt outstanding. We forecast adjusted debt-to-EBITDA will be about 5x and adjusted EBITDA interest coverage about 3x in 2020,” said S&P in a press release.

S&P shifts Targa view to stable

S&P said it revised its outlook for Targa Resources Corp. to stable from positive.

“The outlook revision reflects that we expect the company’s leverage to remain above 5x in 2020. While we anticipate that Targa will continue to materially increase its cash flows this year, we expect its leverage to remain above 5x in 2020. Nonetheless, we expect the company’s free cash flow generation to improve in 2020 and anticipate that it will be roughly free cash flow neutral for the year after having experienced a large free cash flow deficit in 2019,” said S&P in a press release.

S&P affirmed Targa’s BB rating as well the BB rating on its unsecured debt. The agency also affirmed the B+ rating on its structurally subordinated debt. The 3 recovery rating on the unsecured debt and 6 recovery rating on the subordinated debt remain unchanged.

Moody’s rates Arconic Rolled bonds Ba3

Moody’s Investors Service said it assigned a Ba3 rating to Arconic Rolled Products Corp.’s senior secured second-lien bonds. At the same time, Moody’s assigned an SGL-1 speculative grade liquidity rating.

The agency affirmed the Ba2 corporate family rating, Ba2-PD probability of default rating and the Ba1 rating on the company’s $1 billion senior secured first-lien revolving credit facility and $800 million senior secured first-lien term loan B. The outlook is negative.

“The Ba2 CFR reflects Arconic’s end-market diversity and global footprint but incorporates softer market conditions in several of its end markets as well as the expected impact of Boeing’s production suspension of its 737 Max, which will affect all suppliers to this Boeing platform. ARP’s environmental and other unknown magnitude of liabilities from the Grenfell fire are also considerations in the CFR rating,” said Carol Cowan, a Moody’s senior vice president and lead analyst for Arconic, in a press release.

Moody’s rates Castle US notes Caa2

Moody’s Investors Service said it assigned Castle US Holding Corp.’s proposed senior unsecured notes a rating of Caa2. Proceeds will be used to fund a special distribution of about $300 million to an affiliate of Platinum Equity LLC.

The agency also upgraded the ratings on the company’s senior secured first-lien bank facility to B2 from B3. The upgrade of the issuer’s bank debt reflects the incremental first-loss support provided by the issuance of the unsecured bonds. The outlook is stable.

Moody’s also affirmed the company’s B3 rating as well as its B3-PD probability of default rating.

S&P assigns Castle notes CCC

S&P said it assigned its CCC issue-level rating and 6 recovery rating to Castle US Holding Corp.'s (doing business as Cision) proposed $300 million senior unsecured notes. The 6 recovery rating indicates an expectation for negligible recovery (0%-10%; rounded estimate: 5%) of principal in a payment default. The company will use proceeds to fund a shareholder distribution.

“The proposed transaction has no impact on our B- issuer credit rating and stable outlook on Cision's parent Castle Intermediate Holding V Ltd. While we forecast adjusted leverage will remain elevated above 8x over the next 12-24 months, we expect free operating cash flow (FOCF) to debt to remain above 3%, our threshold for the current ratings,” said S&P in a press release.

S&P rates Elanco loans, notes BB+

S&P said it assigned BB+ issue-level rating to Elanco Animal Health Inc.’s proposed revolving credit facility, term loan A, term loan B and senior secured notes. The recovery rating is 3, reflecting the expectation for meaningful recovery (50%-70%; rounded estimate: 65%) in the event of a payment default. Proceeds will be used for the acquisition of Bayer AG’s animal health unit.

“We are also lowering our issue-level rating on Elanco’s unsecured notes to BB from BB+. The recovery rating is 5, reflecting our expectation for modest recovery (10%-30%; rounded estimate: 15%) in the event of a payment default,” S&P said in a press release.

Based on the proposed capital structure, S&P expects to lower the issuer credit rating to BB from BB+ and assign a stable outlook. “We also expect to lower the issue-level ratings on the secured debt to BB from BB+ and the issue-level ratings on the unsecured debt to BB- from BB,” the agency said.

S&P affirmed Elanco’s BB+ rating.

S&P rates Jane Street loan BB-

S&P said it assigned its BB- issue rating on Jane Street Group LLC's new $1.5 billion senior secured term loan B due 2025. This issue refinances the firm's senior secured debt and extends the term to five years. “While we view the extension of the maturity positively, the issue has no impact on our ratings on Jane Street,” S&P said in a press release.

Moody's assigns Jane Street loan Ba3

Moody's Investors Service said it assigned a Ba3 rating to Jane Street Group, LLC's proposed refinancing of its $1.5 billion senior secured first-lien term loan. The assignment follows Jane Street's tenor extension announcement of its existing $1.5 billion term loan, extending the maturity to January 2025 from August 2022. Jane Street's rating outlook remains unchanged at stable.

Moody's said the rating assigned to the senior secured term loan is in line with the existing Ba3 rating already assigned to Jane Street's outstanding senior secured term loan. The maturity extension to 2025 is credit positive.

Jane Street's Ba2 corporate family rating mirrors the firm's highly profitable credit profile and its strong level of retained capital. Jane Street's partnership-like culture and key executives' high level of involvement in control and management oversight provides an effective risk management framework, Moody's said.

Moody’s rates NFP facilities B2

Moody's Investors Service said it assigned B2 ratings to a new five-year senior secured revolving credit facility and a new seven-year senior secured term loan being issued by NFP Corp. The new facilities will refinance the company's $150 million revolver and $1.8 billion term loan with somewhat higher face amounts and longer maturities. Moody's expects to withdraw the ratings on the revolver and term loan once the refinancing closes in early February. The outlook for NFP remains unchanged at stable.

NFP will have pro forma debt-to-EBITDA around 7.5x, (EBITDA - capex) interest coverage in the range of 1.6x-2x, and free-cash-flow-to-debt in the low single digits after the refinancing, according to Moody's estimates. The agency expects NFP to maintain financial leverage at or below 7.5x, with earnings growth from existing and acquired operations offsetting periodic increases in borrowings. These pro forma metrics reflect Moody's adjustments for operating leases, contingent earnout obligations, certain non-recurring items and run-rate EBITDA from acquisitions.

Fitch rates QVC notes BBB-

Fitch Ratings said it assigned a BBB-/RR1 rating to QVC, Inc.'s proposed offering of senior secured notes. QVC is expected to use the proceeds primarily to repay borrowings under its senior secured credit facility along with general corporate purposes.

Fitch said it expects sufficient proceeds will be directed toward debt repayment to make this largely a leverage neutral transaction as management has not articulated any change to their net leverage target of 2.5x. Fitch notes that, simultaneous with the closing of these new notes, QVC intends to reduce its revolver availability to $3.05 billion from $3.65 billion.

S&P assigns Rite Aid notes CCC-

S&P said it assigned its CCC- issue-level rating and 6 recovery rating to Rite Aid Corp.’s proposed $600 million of senior secured notes due 2025. The 6 recovery rating indicates the expectation lenders would receive negligible recovery (0%-10%; rounded estimate: 0%) in the event of a payment default. The company plans to use the proceeds to fund a tender for a similar amount of its unsecured notes due 2023. The proposed notes will be secured by a first-priority lien on the company’s non-asset-based lending facility collateral and a second-priority lien on the ABL collateral.

All of S&P’s other ratings on Rite Aid, including the CCC+ issuer credit rating, remain unchanged. “We continue to view the company’s capital structure as unsustainable because of industry headwinds and its modest cash flows relative to its outstanding debt. We believe Rite Aid’s sufficient liquidity and lack of near-term debt maturities will provide it with at least 12 months to execute a turnaround plan,” said S&P in a press release.

Moody's assigns TransDigm loans Ba3

Moody's Investors Service said it assigned Ba3 ratings to TransDigm Inc.'s new senior secured term loans. All other ratings, including the B1 corporate family rating and the B1-PD probability of default rating, are unchanged. Proceeds will be used to refinance, reprice and extend the maturity of a portion of term loan debt. Ratings on the existing term loans will be withdrawn upon close. The outlook remains stable

The Ba3 ratings for TransDigm's senior secured term debt and senior secured bonds are a notch above the CFR, reflecting their seniority and first-lien security interest in substantially all assets of the company on an aggregate basis. The B3 rating for the company's senior subordinated notes is two notches below the CFR and reflects the subordination of this debt relative to the aforementioned first-lien debt, the agency said.

Both the bank credit facilities and the subordinated notes are guaranteed by all of TransDigm's domestic subsidiaries, as well as the company's holding company parent TDG.

Moody’s revises BorgWarner view to negative

Moody's Investors Service said it affirmed the ratings of BorgWarner, Inc., including its Baa1 senior unsecured rating, following the announcement the company entered a definitive agreement to acquire Delphi Technologies plc, and revised the outlook to negative.

The agency placed Delphi's B2 senior unsecured notes under review for upgrade. Delphi's other ratings are unaffected.

The negative outlook reflects Moody's belief BorgWarner's performance following the acquisition will be challenged over the near-term by continued weakening global automotive production, Delphi's unfavorable product mix of diesel engine-rated products, Delphi's exposure to softening commercial vehicle production (about 25% of Delphi's revenues) and the rate of consumer adoption of electrified vehicle over the coming years.

S&P revises FedEx view to negative

S&P said it revised the outlook for FedEx Corp. to negative from stable.

“The negative outlook reflects that FedEx's credit metrics have deteriorated as the company continues to face a weak manufacturing economy, including reductions in international air freight and tepid B2B domestic parcel and freight shipping. We expect FedEx's FFO-to-debt ratio to be in the low- to mid-20% area in fiscal 2020,” said S&P in a press release.

S&P affirmed FedEx’s BBB rating.

Moody’s revises Southwest Gas view to negative

Moody's Investors Service said it changed the outlooks for Southwest Gas Corp. and its parent Southwest Gas Holdings, Inc. to negative from stable.

“The negative outlooks at both Southwest Gas and Southwest Holdings are driven by our expectation that steadily rising debt at Southwest Gas to fund high capital expenditures could result in a sustained period of weak credit metrics,” said Nana Hamilton, a Moody’s assistant vice president and analyst, in a press release.

The agency expects Southwest Gas will use a combination of internally generated cash flows, debt at the utility level and equity proceeds from the parent to fund this capital investment program. “However, the company's financing plan is more heavily weighted towards debt and we see debt at the utility increasing steadily while cash flow grows more slowly, as it recovers from a largely tax-reform associated decline. This will result in low debt coverage metrics, including a ratio of operating cash flow pre-working capital (CFO pre-WC) to debt in the mid-teens,” Moody’s said.

Moody’s also affirmed the ratings of both companies.

S&P revises Arconic view to stable

S&P said it revised the outlook for Arconic Inc., to be renamed Howmet Aerospace Inc., to stable from negative and affirmed the company’s BBB- rating.

“The outlook revision reflects that pro forma credit metrics will improve in 2020 and further in 2021 as a result of the spinoff of the rolled products business. The company announced that the spinoff of the rolled products segment (to be named Arconic Corp.) will raise $1.2 billion in debt to pay a $700 million dividend and provide initial liquidity for the new company. Howmet, which will consist of just the aerospace operations after the transaction, plans to use the proceeds from the dividend and cash on hand to pay down $1.3 billion in debt,” said S&P in a press release.

Fitch gives Arconic Rolled notes BB+

Fitch Ratings said it assigned an expected BB+/RR4 rating to Arconic Rolled Products Corp.'s new senior second-lien notes. The notes were issued as part of the spin-off transaction from Arconic Inc. Arconic Rolled’s issuer default rating is also an expected BB+, and the company's $800 million senior first-lien secured term loan and $1 billion senior first-lien secured revolver are rated an expected BBB-/RR1. The outlook is stable.

The company’s ratings are supported by the company's strong financial structure, which is generally in line with companies rated at investment grade levels. The company's end-markets are also relatively diversified, and comprised of industries that are shifting towards lighter-weight materials, which Arconic Rolled specializes in, Fitch said.

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