S&P lifts Oxbow, rates loans BB-

S&P said it raised Oxbow Carbon LLC’s issuer rating to BB- from B+ and assigned BB- issue-level and 3 recovery ratings to the company’s planned senior secured debt.

“Oxbow has sustained adjusted leverage below 3x over the past two years, a trend we anticipate will continue over our forecast period. In 2022, the company's adjusted EBITDA increased by about 50% over the previous year on the back of higher prices and volumes in all operating segments. As a result, adjusted leverage was below 2x, which compared favorably with below 3x in 2021.

“We expect earnings to soften this year as prices retreat from the highs of the previous year, with likely an about 50% decline in price in some segments. However, we believe the company's credit metrics have a buffer to absorb a 40%-45% decline in EBITDA and still maintain its adjusted leverage below 3x, all other things being equal, which is supportive of the current rating,” S&P said in a press release.

Oxbow plans to use the new facilities to refinance its debt. Oxbow proposes to issue new senior secured debt consisting of a $325 million revolving credit facility ($62 million drawn at close) due 2028, term loan A of $225 million due 2028, and term loan B of $350 million due 2030. The company will use the proceeds to fully repay about $637 million of existing senior secured debt due in 2024 and 2025.

“When completed, the proposed refinancing mitigates any refinancing concerns in a period of tightening credit conditions and capital market uncertainty, while at the same time extending the company's maturity profile with the earliest material debt maturing in 2028. The transaction will also bolster the company's liquidity, which is supported by continued access to availability under the revolver and projected cash funds from operation of $200 million to $250 million over the next 12 months,” S&P said.

The outlook is stable.

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