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S&P cuts Distribution International, loans
S&P said it lowered its corporate credit rating on Distribution International Inc. to CCC+ from B.
The outlook is stable.
At the same time, the agency downgraded its issue-level rating on the company's $215.5 million first-lien term loan due 2021 to CCC+ from B and its issue-level rating on the $113 million (as originally issued; $98 million currently outstanding as of December 2016) second-lien term loan due 2022 to CCC-from CCC+. The recovery rating on the first-lien loan is 3 indicating an expectation of meaningful (50% to 70%, rounded estimate: 50%) recovery in the event of a payment default. The recovery rating on the second-lien loan is unchanged at 6, indicating an expectation of negligible (0% to 10%, rounded estimate: 0%) recovery in the event of a payment default.
The company has a $110 million asset-based lending facility due 2019, which the agency does not rate.
"The stable outlook reflects our expectation that the company has sufficient liquidity to meet its financial obligations in the next 12 months and we expect cash flow to be at or slightly below break-even for the year (after capital expenditures)," S&P credit analyst Vania Dimova said in a news release.
S&P said Distribution International's credit measures deteriorated (with adjusted debt to EBITDA of about 12 times in 2016) due to lower-than-expected sales caused by weak oil and gas servicing end markets. It does not expect DI's credit measures to meaningfully recover in 2017.
While we do not believe that the company faces a liquidity crisis in the next 12 months, we believe that company is dependent on favorable business, financial, and economic conditions to meet its financial obligations in the long-term,” the agency said.
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