Fitch trims FirstEnergy

Fitch Ratings said it downgraded FirstEnergy Corp.’s and FirstEnergy Transmission, LLC’s long-term issuer default ratings to BBB- from BBB.

Also, Fitch downgraded all of FirstEnergy’s rated operating utility subsidiaries’ long-tern IDRs except Monongahela Power Co., Allegheny Generating Co. and Potomac Edison Co. The agency affirmed the long-term IDRs of Monongahela and Potomac at BBB. Fitch revised their outlooks to negative from stable. Allegheny’s long-term IDR has been affirmed at BBB and its outlook modified to negative from stable. The outlook is negative for FirstEnergy and all of its rated subsidiaries.

“The rating actions reflect the termination of three senior executives including former FE CEO Charles E. Jones and two other senior executives and ongoing credit concerns regarding potential illicit activity at FE in connection with an ongoing federal bribery/racketeering investigation,” the agency said in a press release.

S&P cuts FirstEnergy

S&P said it lowered the issuer ratings for FirstEnergy Corp. and its subsidiaries to BB+ from BBB-. The agency also downgraded Allegheny Generating Co. to BB from BBB- after FirstEnergy reported firing its top three executives Friday.

S&P cut the senior unsecured issue-level rating on FE and FirstEnergy Transmission to BB+ from BBB- and assigned 3 recovery ratings, indicating meaningful (50% to 70%; rounded estimate: 65%) recovery in a default. The recovery rating is capped at 3, consistent with the approach for assigning recovery ratings to unsecured debt issued by BB category corporate entities because recovery prospects are highly vulnerable to impairment before default by added debt issuance, S&P said.

The agency also lowered the senior unsecured issue ratings on American Transmission Systems Inc., Jersey Central Power & Light Co., Metropolitan Edison Co., Mid-Atlantic Interstate Transmission, Ohio Edison Co., Pennsylvania Electric Co., and Trans-Allegheny Interstate Line Co., to BBB- from BBB and assigned 2 recovery ratings indicating substantial (70% to 90%; rounded estimate: 85%) recovery in a default. The recovery rating is capped at 2, consistent with the approach for assigning recovery ratings to unsecured debt issued by BB category regulated utilities because recovery prospects are somewhat vulnerable to impairment before default by added debt issuance, the agency said.

S&P downgraded the senior unsecured issue ratings on Cleveland Electric Illuminating Co. to BBB- from BBB and assigned 2 recovery rating, indicating substantial (70% to 90%; rounded estimate: 75%) recovery in a default. Finally, the agency trimmed the senior secured issue ratings on Cleveland Electric, Ohio Edison Co., Toledo Edison Co., and Monongahela Power Co. to BBB+ from A-, reflecting a 1+ recovery rating.

“The two-notch downgrade reflects the termination of the company’s CEO Chuck Jones and two other executives, for violating company policies and its code of conduct. We view the severity of these violations at the highest level within the company as demonstrative of insufficient internal controls and cultural weakness. We view these violations as significantly outside of industry norms and, in our view, represent a material deficiency in the company’s governance,” S&P said in a press release.

The ratings remain on CreditWatch with negative implications, where they were placed on July 20.

Fitch downgrades Nabors

Fitch Ratings said it downgraded the issuer default ratings for Nabors Industries, Ltd. and Nabors Industries, Inc. to C from B- following its announcement to exchange a series of senior unsecured notes for senior unsecured guaranteed notes.

“The downgrade results from Fitch viewing the transaction as a distressed debt exchange (DDE). Per Fitch’s criteria, the IDR will be downgraded to restricted default (RD) upon the completion of the DDE. The IDR will subsequently be re-rated to reflect the post-DDE credit profile,” the agency said in a press release.

Fitch also downgraded the affected senior unsecured notes to C/RR6 from CCC/RR6. Fitch affirmed the Nabors Industries Inc. unsecured priority guaranteed revolving credit facility at BB-/RR1. The B-/RR4 Nabors Industries Ltd. senior unsecured guaranteed notes are placed on ratings watch negative to reflect potential notching implications of the proposed guaranteed notes, the agency said.

Fitch removed the negative outlook.

S&P cuts Nabors Industries Ltd.

S&P said it cut Nabors Industries Ltd.’s issuer rating to SD from CCC+, the issue-level rating on its 0.75% exchangeable notes due 2024 to D and the ratings on the notes involved in the tender to CC.

The agency affirmed the CCC- issue-level rating on the company’s 4 5/8% notes maturing in 2021 because the early tender is at par, the company has liquidity under its credit facility to fund the maturity and the new notes would rank higher in the capital structure and receive a higher coupon.

“The downgrade follows Nabors’ completion of a private exchange, whereby it exchanged $115 million of the principal amount of its 0.75% exchangeable bonds due 2024 for $50.485 million of new senior priority guaranteed notes due 2025. In our view, the higher interest rate and additional guarantees are insufficient compensation to offset the extended maturity and significant discount to par. Therefore, we consider the transaction to be a distressed exchange and tantamount to a default,” S&P said in a press release.

S&P cuts Populus

S&P said it lowered its ratings on Populus Financial Group Inc. and its senior secured notes due 2022 to B- from B. The recovery rating remains 3, indicating an expectation for a meaningful recovery in a default.

“The downgrade reflects our view that there is a heightened risk that Populus Financial could face a conventional default over the next two years, especially if the company has difficulty refinancing its secured notes due in Dec. 2022 on economically favorable or viable terms. On Oct. 28, Populus reported its third-quarter financial results and disclosed that it repurchased $60 million of its senior secured notes for $42 million (70% of par) over the past two quarters. We believe these repurchases raise doubts about management’s willingness to honor its obligations on the remaining $255 million of senior secured notes,” S&P said in a press release.

However, S&P noted it viewed the repurchases as opportunistic, not distressed.

The outlook is negative.

DBRS cuts SNC-Lavalin

DBRS said it downgraded the issuer rating and senior debentures rating of SNC-Lavalin Group Inc. to BB (high) from BBB (low) and maintained the negative trend. DBRS also assigned a recovery rating of RR4 to the senior debentures.

“The downgrade is driven by recurrent losses in the projects business and continued underperformance in SNC’s earnings and credit metrics during year-to-date (YTD) Q3 2020 – when compared with other investment-grade peers. DBRS Morningstar notes that the recurrence of project losses (despite their arising from distinct projects and being one-off in nature) continues to surprise on the negative side and demonstrates a relative weakening of project control,” DBRS said in a press release.

Moody’s trims Tullow Oil

Moody’s Investors Service said it downgraded Tullow Oil plc’s corporate family rating to Caa1 from B3 and the probability of default rating to Caa1-PD from B3-PD. Moody’s also confirmed the Caa2 ratings assigned to Tullow Oil’s senior unsecured notes due in 2022 and in 2025. Moody’s changed the outlook to negative from ratings under review.

These actions conclude the review for downgrade started on March 25, Moody’s said.

The rating action reflects the expectation a more prolonged downturn and slower recovery of the oil prices in the next 12-18 months, compared to previous expectations, will hurt Tullow Oil, given the high FCF break-even point of Tullow Oil at about$40/bbl, Moody’s said.

“With no or limited sustained recovery in the pricing environment in the next 12-18 months, Moody’s does not believe that Tullow Oil’s capital structure will be sustainable in the medium term and it remains doubtful that the company will have the resources to repay the $650 million senior unsecured notes maturing in 2022, in the absence of additional disposals (which may weaken the profitability and/or the growth prospects of the company further) or capital injections from shareholders,” the agency said in a press release.

S&P ups AES

S&P said it raised its ratings on AES Corp., including the issuer credit rating to BBB- from BB+ and the issue-level ratings on its senior unsecured debt.

“The upgrade to investment grade follows further de-risking. Our rating on AES reflects a satisfactory business risk profile (BRP) and a significant financial risk profile. While we have not changed AES’ BRP, we note an improvement in the BRP from further de-risking as the company rationalizes its portfolio (now down to 13 from 29 countries) and refocuses its operations to rate-based utilities and long-term contracted businesses,” S&P said in a press release.

The outlook is stable.

S&P puts IRB on positive watch

S&P said it placed all its ratings on IRB Holding Corp. (Inspire Brands), including its B issuer credit rating, on CreditWatch with positive implications. The placement follows Inspire reporting its plan to acquire Dunkin’ Brands.

“We expect the company to fund the transaction with a combination of cash, newly issued debt, and equity investment from its sponsor. We anticipate Inspire will maintain a highly leveraged capital structure following the transaction, which will include assuming Dunkin’s existing $2.4 billion of debt. As such, we believe that benefits from increased scale and improved diversification could possibly be offset by a very high level of leverage pro forma for the transaction,” S&P said in a press release.

The agency said it aims to resolve the CreditWatch after reviewing the pro forma business and capital structure when the deal’s details become available.

Moody’s changes AAG view to stable

Moody’s Investors Service said it changed the rating outlook of AAG FH LP to stable from negative and affirmed all its other ratings, including its B2 corporate family rating, B2-PD probability of default rating and the B3 rating on its senior unsecured notes.

“The stabilization of the outlook reflects AAG’s strong recovery after its dealerships reopened in June, and our expectation that this will continue,” said Louis Ko, a Moody’s vice president and senior analyst, in a press release.

S&P shifts Group 1 Automotive view to stable

S&P said it shifted the outlook for Group 1 Automotive Inc. to stable from negative.

“Group 1 reported a 10% year-over-year increase in its gross profit in its third-quarter as its higher new-vehicle margins more than offset the effect of its lower volumes. The major factors behind the recent increase in the company’s profit were significant improvements in its new and used vehicle margins and substantial cost leverage as it achieved management’s targeted 20% efficiency improvement in its sales and service processes, S&P said in a press release.

The outlook reflects Group 1’s results for the third quarter ended Sept. 30, and the view that the risk of its debt-to-EBITDA ratio exceeding 4x while its FOCF to debt falls to less than 10% for an extended period has declined, the agency said.

Moody’s revises Hillman view to stable

Moody’s Investors Service said it revised the outlook to stable from negative and affirmed the Hillman Group Inc.’s ratings, including the company’s corporate family rating at B3, probability of default rating at B3-PD, first-lien term loan rating at B2 and senior unsecured notes at Caa2. Simultaneously, the agency changed the speculative grade liquidity to SGL-2 from SGL-3.

“Today ratings and outlook actions reflect Hillman’s strong operating performance year-to-date, resulting in a meaningful improvement in financial leverage and free cash flow generation,” said Oliver Alcantara, Moody’s lead analyst for the company, in a press release.

“The company’s revenue and earnings will remain stable next year following a strong fiscal 2020, benefiting from continued good consumer demand for the company’s products and from sequential recovery in its consumer connected solutions business, which will support credit metrics remaining at around current levels,” added Alcantara.

S&P rates Dave & Buster’s, notes B-

S&P said it assigned B- ratings to Dave & Buster’s Inc. and its $550 million of senior secured notes.

“We anticipate slowly improving sales as venues reopen to limited demand. However, additional temporary closures caused by the regional resurgence of the coronavirus could lead to further operating volatility. We expect hindered profitability over at least the next 12 months due to deleveraging of lower sales on fixed costs,” S&P said in a press release.

The agency said it sees S&P Global Ratings-adjusted debt to EBITDA in fiscal 2021 (ending Jan. 30, 2022) exceeding 7x, compared with 4.7x in fiscal 2019.

Proceeds will be used to refinance the company’s term loan and repay most of its revolver borrowings.

The outlook is negative.

Moody’s assigns Molina notes Ba3

Moody’s Investors Service said it assigned a Ba3 rating to the planned issuance of $650 million in new Molina Healthcare, Inc. senior unsecured notes with a 10-year tenor.

“According to Moody’s, Molina’s Ba3 debt rating reflects the company’s solid earnings momentum, competitive margins and strong position in the Medicaid segment. On Oct. 6, 2020, Moody’s upgraded Molina to Ba3 from B2, a reflection of Molina’s sustained improvement in results since a previous upgrade in April 2019,” Moody’s said in a press release.

The proceeds will be used to pre-pay $330 million in senior unsecured notes due in 2025 and general corporate purposes.

The outlook on Molina and its affiliates is stable.

S&P rates Molina notes BB-

S&P said it assigned its BB- debt rating to Molina Healthcare Inc.’s $650 million of 10-year senior unsecured notes.

Molina will use proceeds for general corporate purposes, including refinancing its $330 million outstanding of 4 7/8% senior unsecured notes due 2025.

Molina’s BB- issuer rating is unchanged, and the outlook remains positive.

Fitch acts on JetBlue certificates

Fitch Ratings said it downgraded multiple tranches of JetBlue’s enhanced equipment trust certificates. Fitch cut JetBlue’s pass-through certificates series 2020-1 class B certificates to BBB- from BBB.

The JetBlue 2019-1 class AA certificates have been downgraded to A+ from AA-/rating watch negative, the class A certificates to BBB+ from A and the class B certificates to BBB- from BBB. Fitch affirmed the JetBlue 2020-1 class A certificates and JetBlue 2013-1 class A certificates at A and A+, respectively.

“The rating actions are being driven by the combined effects of Fitch’s recent downgrade of JetBlue’s issuer default rating to BB- from BB, increased value stress assumptions utilized in Fitch’s models, which reflect the ongoing pressure on the airline industry, and updated appraisal values that show declining levels of overcollateralization for certain transactions,” Fitch said in a press release.

The agency affirmed the JBLU 2020-1 and JBLU 2013-1 senior tranche ratings at A and A+, respectively, reflecting strong levels of overcollateralization and attractive underlying collateral that continue to support the existing ratings.

S&P pares Par Petroleum

S&P said it downgraded Par Petroleum LLC’s issuer rating to B from B+ and the rating on its senior secured debt to B+ from BB-. The 2 recovery rating remains unchanged, indicating an expectation for substantial (70%-90%; rounded estimate: 75%) recovery in a default.

“We forecast the refining sector will continue to experience weak refining margins and product demand, which will cause Par Petroleum LLC to sustain a higher level of leverage than we previously assumed,” S&P said in a press release.

S&P said it forecasts a gradual recovery in the refining sector starting in the second half of 2021 as the pandemic’s effects subside, though the level of uncertainty remains high.

“In particular, we think a full recovery at the company’s Hawaii refinery, where the benchmark Singapore oil refining index turned negative in the second quarter of 2020 but has since improved from these lows, could take even longer,” the agency said.

The outlook is negative.

Moody’s pulls Smyrna rating

Moody’s Investors Service said it withdrew the B1 rating on Smyrna Ready Mix Concrete, LLC’s senior secured credit facility. All other ratings for the company remain unchanged. The outlook is stable.

“The rating action follows the cancelation of the proposed $315 million senior secured credit facility. Instead, the company has increased the size of its proposed senior secured notes to $830 million from $515 million,” Moody’s said in a press release.

The note proceeds will be used to refinance the company’s term loan facility and fund several already entered into bolt-on acquisitions, strengthening Smyrna’s market position in the ready-mix concrete business, the agency said.

Pro forma for the bolt-on acquisitions and the proposed financing, Moody’s forecasts Smyrna’s leverage will be 3.9x at Dec. 31 (including Moody’s adjustments), the agency said.

Fitch acts on Spirit Airlines certificates

Fitch Ratings said it downgraded Spirit Airlines’ 2017-1 class AA enhanced equipment trust certificates to AA- from AA. The certificates remain on rating watch negative. Fitch affirmed Spirit’s 2017-1 class A and B certificates and Spirit’s 2015-1 class A and B certificates.

“The downgrades of the AA certificates are driven by the combined effects of increased value stress assumptions used in Fitch’s models, which reflect the ongoing pressure on the airline industry, and updated appraisal values that show declining levels of overcollateralization,” Fitch said in a press release.

Fitch said the class AA certificates remain on rating watch negative, indicating limited headroom at the current rating level and additional layers of risk to aircraft values driven by the pandemic’s effects.

The affirmation of Spirit’s 2017-1 and 2015-1 class A certificates reflects healthy levels of overcollateralization and attractive underlying collateral that support the ratings, the agency said.

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