S&P assigns B- to Werner FinCo notes

S&P said it preliminarily assigned B- issue and 3 recovery ratings to Werner Finco LP’s planned $400 million of five-year senior secured notes due 2028 and preliminary CCC issue and 6 recovery ratings to its proposed $265 million junior-lien exchange notes due 2028.

Werner plans to use the proceeds from the secured notes to refinance its term loan due 2024 and to pay down borrowings on its asset-based lending facility. The junior-lien notes will be used for all or a portion of its existing senior unsecured notes due 2025. As part of the transaction, the company is also exchanging the sponsor's $15 million incremental term loan for subordinated debt.

“We believe the proposed refinancing will alleviate the risk related to its near-term maturities and provide it with an improved liquidity cushion,” S&P said in a press release.

S&P placed all the ratings on CreditWatch with positive implications.

We view the terms of the proposed junior-lien exchange notes, including the exchange at par, the incremental interest, and the granting of a junior lien, as providing adequate compensation for the unsecured notes. In addition, the company is repaying $60 million of revolver borrowings (before transaction fees and expenses), which will increase its liquidity cushion. We also forecast Werner will remain in compliance with its springing financial covenants and meet our requirements for adequate liquidity over the next 12 months, including maintaining liquidity sources of more than 1.2x its uses,” the agency added.

S&P said it aims to resolve the CreditWatch placement when the refinancing closes and it has reviewed the final terms of the new debt. “We will likely raise our issuer credit rating on the company by one notch to B- if the transactions close on the proposed terms.”

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