S&P cuts C&W DAC rating

S&P said it downgraded its ratings for C&W Senior Financing Designated Activity Co.’s $1.22 billion senior notes due 2027 and its $500 million senior notes due 2026 to B+ from BB- after the company’s recent announcement of its corporate and legal structure reorganization.

“The ultimate parent company, Cable & Wireless Communications Ltd. (CWC; BB-/Stable/B), recently announced that C&W Senior Finance Ltd., CWC’s indirect subsidiary, will now be the issuer of the existing $1.72 billion notes, which C&W Senior Financing Designated Activity originally issued in 2017. Given that C&W Senior Finance Ltd. is the indirect parent company of C&W Senior Financing Designated Activity, the debt is structurally subordinated to Coral-US Co-Borrower, LLC and Sable International Finance Ltd.’s obligations, consisting of $1.64 billion term loan B, $625 million undrawn revolving credit facility, and $400 million senior secured notes due 2027,” said S&P in a press release.

“As a result, we lowered the issue-level ratings on C&W Senior Financing Designated Activity, reflecting the structural subordination,” the agency said.

Moody’s downgrades Flexera facility

Moody’s Investors Service said it downgraded the rating on Flexera Software LLC’s first-lien senior secured credit facility to B2 from B1.

Flexera plans to issue a $210 million incremental first-lien term loan to fund a $60 million acquisition of a software compliance solutions provider and fully repay $150 million of second-lien debt.

“The proposed transaction is broadly leverage neutral as Moody’s adjusted leverage will increase to 6.8x from 6.7x debt-to-EBITDA, while interest cost savings will be very modest at around $1.5 million annually,” Moody’s said in a press release.

The downgrade of the first-lien senior secured ratings to B2 reflects the change in the mix of debt to an all first-lien secured debt structure. Full repayment of the second-lien debt will remove the loss absorption support to the first-lien credit facilities and consequently weaken the recovery prospects for the first-lien credit facilities in case of a default.

The Caa1 rating on the senior secured second-lien term loan will be withdrawn upon the closing of the transaction if the debt is repaid as expected. Moody’s also affirmed Flexera’s B2 corporate family rating and B2-PD probability of default rating.

S&P cuts Ineos debt, new debt BB

S&P said it downgraded Ineos Styrolution Holding Ltd.’s secured debt rating to BB from BB+ including new debt. S&P also affirmed the company’s BB rating.

The company is contemplating a complete term loan refinancing with additional secured debt, to pay a dividend to ultimate parent Ineos Ltd. and fund expansion.

“We expect €1.18 billion in debt post-transaction. The company plans to optimize financing cost, improve its maturity profile, provide sources to fund a €300 million upstream dividend to parent Ineos, and provide for cash on the balance sheet to fund upcoming capex. The transaction – mainly a dividend recap and capex funding – is affecting credit metrics negatively,” S&P said in a press release.

The outlook is stable.

Moody’s upgrades PDC Energy

Moody’s Investors Service said it upgraded PDC Energy’s corporate family rating to Ba2 from Ba3 and its probability of default rating to Ba2-PD from Ba3-PD. Moody’s also upgraded ratings of its senior unsecured notes and convertible notes to Ba3 from B1. PDC’s speculative grade liquidity rating was changed to SGL-1 from SGL-2.

The upgrades conclude the review started Aug. 27.

Moody’s also upgraded SRC Energy Inc.’s senior unsecured notes rating to Ba3 from B3. SRC’s B1 CFR and B1-PD PDR were withdrawn. The outlook remains stable. These actions follow the closing of PDC’s acquisition of SRC on Jan. 14 when PDC merged with SRC.

“PDC’s ratings upgrade reflects increased scale in the DJ Basin and improved credit metrics as a result of the company’s acquisition of SRC, which has highly complementary assets and meaningfully increases reserves and production,” said Arvinder Saluja, a Moody’s vice president, in a press release.

Moody’s changes Men’s Wearhouse view to negative

Moody’s Investors Service said it revised the outlook for Men’s Wearhouse, Inc. to negative from stable, and affirmed its ratings, including the Ba3 corporate family rating, Ba3 secured term loan rating and B2 unsecured note rating. The SGL-2 speculative grade liquidity rating is unchanged. Men’s Wearhouse is a subsidiary of Tailored Brands, Inc.

“The outlook change to negative reflects Tailored Brand’s weakened profitability and negative free cash flow after dividends, and the potential for protracted weakness as it further implements its transformation initiatives while navigating a challenging apparel retail environment,” said Mike Zuccaro, a Moody’s vice president and senior analyst, in a press release.

“Tailored Brands has yet to implement larger cost reduction initiatives, as its store fleet review is ongoing. It needs to demonstrate that transformation initiatives are taking hold and will begin to have a positive impact on margins, cash flow and interest coverage over the next twelve months,” Zuccaro added.

Tailored Brands reported sequential improvement in comparable-store sales in its third quarter ended Nov. 2, with positive comps in October and growth in custom suiting and several polished casual clothing categories. Nevertheless, third-quarter total net sales and adjusted operating profit declined again year-over-year, largely due to high promotional levels and a shift toward lower margined custom suiting, polished casual apparel and e-commerce sales. Year-to-date free cash flow is also negative due to weaker earnings, increased working capital and capital expenditures, the agency said.

S&P: Turning Point view to negative

S&P said it revised its outlook for Turning Point Brands to negative citing increased debt and the weakening of the vaping business.

“The outlook revision reflects the significant deterioration in credit metrics. TPB’s credit metrics deteriorated significantly after the sizable convertible debt issuance last summer and weaker than expected profitability due to its pressured vaping business. Pro forma leverage increased to the low-5x area as of Sept. 30, 2019, from 3.6x at June 30, 2019. While the issuance in itself was a leveraging event, it did not warrant a rating action at the time given our expectation for continued healthy profit growth that would help sustain leverage comfortably below 5x,” said S&P in a press release.

S&P affirmed Turning Point’s B+ rating and the BB rating on the company’s first-lien debt.

S&P revises MEG Energy view to stable

S&P said it revised the outlook for MEG Energy Corp. to stable from negative and affirmed its B+ rating. The agency also affirmed the BB rating with a 1 recovery rating on the senior secured debt and BB- rating with a 2 recovery rating on the senior unsecured debt.

The outlook revision reflects the improved prospects for MEG’s credit measures over the next two years, supported by recent debt repayments and the company’s ability to reduce exposure to the Western Canadian Select differential. MEG generated-stronger-than expected earnings and cash flows over the past 12 months and used free cash flows to reduce debt by close to C$500 million in 2019, S&P said.

Moody’s rates Ashton Woods notes Caa1

Moody’s Investors Service said it assigned a Caa1 rating to Ashton Woods USA, LLC’s proposed $250 million notes due 2028. Ashton Woods’ other ratings and stable outlook remain unchanged.

The proceeds will be used to pay down the balance on the revolver as well as for general corporate purposes. As of Jan. 9, the company had $224 million drawn on the revolver.

“While the transaction is slightly leveraging, the increase in debt outstanding is somewhat mitigated by the improved debt maturity profile of the company following the issuance,” said Moody’s in a press release.

The Caa1 rating on the company’s senior unsecured notes is positioned one notch below the B3 corporate family rating and reflects the priority ranking of Ashton Woods’ $350 million secured borrowing base revolver maturing in August 2023.

Moody’s assigns B2 to PHH loan

Moody’s Investors Service said it assigned a B2 rating to PHH Mortgage Corp.’s proposed $200 million senior secured term loan due May 15, 2022. The outlook is negative.

Moody’s rated the senior secured term loan B2 based on PHH’s Caa1 corporate credit profile, the loan’s ranking and terms and the strength of the loan’s asset coverage. PHH is a wholly owned operating subsidiary of Ocwen Financial Corp., which in the second quarter of 2019 merged its operating subsidiary, Ocwen Loan Servicing, LLC into PHH.

As part of the proposed transaction, the loan’s maturity date will be extended to May 15, 2022 from Dec. 5, 2020. In addition, the existing term loan, issued by Ocwen Loan Servicing, LLC will be paid down from $332 million as of Sept. 30 to $200 million.

PHH’s Caa1 corporate family rating reflects the firm’s weak capital level, currently constrained profitability and challenges to building a resilient business model. Ocwen’s financial profile also reflects the challenges resulting from limited opportunities available in its core market, credit impaired residential mortgage servicing.

S&P rates BroadStreet Partners loan B

S&P said it assigned its B debt rating to BroadStreet Partners Inc.’s proposed $1.11 billion term loan due 2027 and $250 million revolver due 2025. S&P also assigned a 3 recovery rating, indicating an expectation of meaningful recovery (50%) in the event of a payment default.

The new financing will have similar terms to the outstanding first-lien term loan. BroadStreet will use the proceeds to pay down the current term loan B ($868 million outstanding as of Sept. 30) and $230 million to pay for acquisitions.

The company’s credit quality measures are in line in with S&P’s forecast, including pro forma financial leverage (debt-to-EBITDA ratio including operating leases) for both the incremental debt and the earnings from acquisitions of around 5.5x-6x for the 12 months ended Sept. 30.

The B issuer credit rating on BroadStreet is unaffected by the new term loan and reflects the company’s participation and narrow focus in the highly competitive, fragmented and cyclical middle-market insurance brokerage industry, S&P said.

Moody’s rates Ineos debt Ba2

Moody’s Investors Service said it assigned Ba2 ratings to the new €500 milllion and $202 million senior secured term loan B facilities due 2027 to be entered into by Ineos Styrolution Group GmbH and Ineos Styrolution US Holding LLC and a Ba2 rating to the €500 million senior secured instrument to be issued by Ineos Styrolution Group.

Concurrently, Moody’s affirmed the Ba2 corporate family rating and Ba2-PD probability of default rating of Ineos Styrolution Holding Ltd. as well as the Ba2 ratings assigned to the outstanding senior secured term loan B facilities due March 2024, borrowed by Ineos Styrolution Group and Ineos Styrolution US Holding. The outlook remains stable.

The instrument ratings were assigned in the context of Styrolution’s proposed transaction to refinance its term loan B and drawings under the securitization facility, as well as fund a €300 million shareholder distribution and future expansion capex. This will enable the group to extend its maturity profile and maintain a liquidity buffer.

However, as a result of Styrolution upstreaming total dividends of €870 million to its owner during 2019-2020, Moody’s said it estimates the group’s pro-forma leverage (as measured by adjusted total debt to EBITDA) would be around 1.8x at year-end 2019.

Moody’s assigns Nationstar notes B2

Moody’s Investors Service said it assigned a B2 rating to Nationstar Mortgage Holdings Inc.’s proposed $600 million senior unsecured notes due in February 2027. The rating outlook is negative.

Moody’s said it rated the senior unsecured notes B2 based on Nationstar’s B2 corporate credit profile, the notes’ ranking and terms, and the strength of the notes’ asset coverage. The key terms of the loan are largely consistent with Nationstar Mortgage LLC’s senior unsecured notes.

Nationstar Mortgage LLC is a wholly owned operating subsidiary of Nationstar Mortgage Holdings Inc., which is a wholly owned subsidiary of Mr. Cooper Group Inc. Proceeds will be used to fund the redemption of the company’s outstanding senior unsecured notes due 2021 and 2022.

Nationstar’s B2 corporate family rating reflects the company’s position in the U.S. residential mortgage servicing market, constrained profitability and weakened capitalization. It also takes into consideration the risks associated with the firm’s growth of its servicing portfolio, which are mitigated by its solid track record of acquiring and integrating residential mortgage servicing assets.

S&P rates Vincent Topco B

S&P said it assigned B ratings to Vincent Topco BV, its subsidiary Vincent Bidco BV and its first-lien revolver and term loan. S&P also assigned a 3 recovery rating to the facilities. Private equity firm Bridgepoint used the proceeds to acquire a majority stake in Vermaat via Vincent.

Vincent Topco issued €522 million of new credit facilities via Vincent Bidco to finance the deal, including a €110 million multicurrency revolver, a €320 million first-lien term loan and a €92 million second-lien term loan.

“Vermaat is a market leader in the Netherlands’ premium catering segment. In our view, Vermaat’s business risk profile is supported by its sustained leading market position as a premium catering and hospitality provider across a number of end markets,” said S&P in a press release.

The outlook is stable.

Moody’s reviews Boeing for cut

Moody’s Investors Service said it placed its debt ratings, including the A3 senior unsecured ratings, for the Boeing Co. and subsidiary Boeing Capital Corp. on review for downgrade.

“Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, and an ensuing period of heightened operational and financial risk, even if certification of the MAX comes relatively near-term, as expected,” said Jonathan Root, a Moody’s senior vice president and lead analyst for the company, in a press release.

Key supplier, Spirit AeroSystems’ Jan. 10 announcement it will lay-off a significant part of its MAX workforce was unexpected and is an example of the ongoing event risk weighing on the credit profile. The recent news covering Boeing employee e-mails including exchanges regarding the importance of having the 737 MAX be similar enough to its predecessor, the 737 NG, to avoid a regulatory requirement of simulator training brings to the forefront the judicial, legislative and regulatory risk that has existed since the grounding began last March, Moody’s said.

“These risks have been mostly in the background while the focus has been on the process for the MAX to return to service. Moody’s considers that the longer the grounding runs, the greater the risk to Boeing’s already blemished reputation with broadening governance and social considerations related thereto, which could have a more lasting impact on the company’s future business,” the agency said.

S&P rates Owl Rock notes BBB-

S&P Global Ratings today said it assigned its BBB- debt rating on Owl Rock Capital Corp.’s proposed offering of senior unsecured notes due July 2025. Owl Rock expects to use the proceeds to pay down a portion of its indebtedness under its revolving credit facility.

The ratings reflect Owl Rock’s low leverage and experienced management team. “We expect leverage will gradually rise toward the company’s target of 0.75x debt to equity, from 0.42x as of Sept. 30, 2019. Prior to its IPO of common stock, ORCC delivered its final capital drawdown notice to investors in June 2019, the proceeds from which it used to pay down all outstanding debt under its subscription credit facility and reduce other indebtedness, which reduced debt to equity to 0.28x as of June 30, 2019. In our view, management is highly experienced in leveraged finance and has established an institutional-quality business development company (BDC) with strong origination capabilities,” S&P said in a press release.

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