Moody's ups Allis-Chalmers Energy

Moody's Investors Service said it upgraded Allis-Chalmers Energy, Inc.'s corporate family rating to B2 from B3, its probability-of-default rating to B2 from B3 and its senior unsecured note ratings to B2 (LGD4, 55%) from B3 (LGD4, 53%).

The outlook is stable.

The company's SGL-2 speculative grade liquidity rating was not affected by the rating actions.

The upgrade reflects the company's financial performance and its success integrating its acquisitions, its improved scale and diversification and the management's willingness to fund a significant portion of material acquisitions with equity.

The ratings also represent the sector's outlook, which is strong but not as strong as the past two years, and the expectation that the company will continue to fund material acquisitions with equity. Moody's said that given the recent upgrade, a positive outlook is unlikely for the near term.

The company continues to face valuation and performance risk due to a number of acquisitions priced during up-cycle conditions and faces integration risk due to its aggressive growth strategy.

The company reported a debt-to-EBITDA ratio of 2.9 times for the first quarter.

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