Moody’s downgrades UTEX

Moody’s Investors Service said it downgraded UTEX Industries, Inc.’s corporate family rating to Ca from Caa2, probability of default rating to D-PD from Caa2-PD, first-lien term loan to Ca from Caa1 and second-lien term loan to C from Ca. The rating on the first-lien revolving credit facility, previously withdrawn as of the maturity date, has been restored and downgraded to Ca from Caa1. The agency changed the outlook to negative from stable.

Moody’s said it learned UTEX reached an agreement extending its first-lien revolver’s maturity beyond the May maturity date, which the agency considers a distressed exchange and views as a default.

“Moody’s has also become aware of the company’s subsequent failure to repay the revolver upon the extended maturity date, as well as its failure to fund the scheduled principal payment on its first-lien term loan and scheduled interest payments on its first-lien term loan and second-lien term loan,” the agency said in a press release.

Further, Moody’s said it learned UTEX and members of an ad hoc group of first-lien lenders executed a forbearance agreement concerning those payments due under the first-lien credit agreement. Under the company’s intercreditor agreement, second-lien term loan lenders are prohibited from exercising certain remedies for this nonpayment for at least 180 days, the agency said.

“This will likely lead to a material debt restructuring on distressed terms as the company considers strategic alternatives to potentially pursue a sustainable capital structure, while also responding to the coronavirus’ negative effect on oil prices and demand for its products,” Moody’s said.

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