Moody’s downgrades Acelity, notes

Moody's Investors Service said it downgraded Acelity LP Inc.’s corporate family rating to B3 from B2, second-lien notes to Caa1 from B3 and senior unsecured notes to Caa2 from Caa1.

The Ba3 rating on the first-lien term loans and revolving credit facility were affirmed. However, given Acelity's current capital structure, if the company was to add incremental senior secured debt, the ratings on these instruments would likely be downgraded to B1.

Concurrently, the agency lowered Acelity's speculative grade liquidity rating to SGL-4 from SGL-2.

The outlook is stable.

Moody’s said the downgrade of the corporate family rating reflects its expectation that it will be difficult for Acelity to meaningfully reduce its very high financial leverage.

Despite moderate underlying growth, headwinds, including the potential negative impact of competitive bidding and the re-entrance of Smith and Nephew's competitive product in the negative pressure wound therapy segment, will constrain EBITDA growth. While the company has indicated its intent to raise equity and reduce leverage through an initial public offering, the timing and extent of debt repayment from such an event is uncertain, particularly given current market volatility.

Moody's also expects that Acelity will continue to pursue tuck-in acquisitions to supplement organic growth.

The downgrade also reflects the agency’s belief that the company's liquidity position will weaken as a result of considerable cash requirements in the near-term, including continued litigation settlement payments, high interest costs as well as upcoming debt maturities.

S&P downgrades UTEX

Standard & Poor’s said it lowered the corporate credit rating on UTEX Industries Inc. to CCC+ from B-.

The agency also said it lowered the rating on the company’s first-lien debt to CCC+ from B- and on the second-lien debt to CCC- from CCC.

The recovery rating remains at 3 on the first-lien debt, indicating 50% to 70% expected default recovery, and 6 on the second-lien debt, indicating 0 to 10% expected default recovery.

The outlook is stable.

The downgrades reflect an expectation for weakening demand for oilfield services as the exploration and production industry continues capital spending cuts in 2016, S&P said.

Declining demand for the company’s products significantly hurt revenues in 2015, the agency said, and will continue to affect them in 2016.

Moody’s lifts Affinion CFR, notes

Moody's Investors Service said it revised Affinion Group Holdings, Inc.'s probability of default rating to Caa1-PD/LD from Ca-PD and raised its corporate family rating to Caa1 from Caa2.

The senior unsecured notes due 2015 and senior secured PIK/Toggle notes due 2018, as well as Affinion Investments, LLC's senior subordinated notes due 2018 were upgraded to Caa3 from Ca.

Affinion Group, Inc.'s senior secured bank credit facility (revolver and first-lien term loan) due 2018, senior secured second-lien term loan due 2018 and senior unsecured notes due 2018 were all affirmed at B1, Caa1 and Caa3, respectively.

These actions follow the completion of a Nov. 9 recapitalization that raised $110 million of new capital for Affinion in a rights offering and exchanged roughly $585 million of Affinion Investments’ outstanding 13½% senior subordinated notes due 2018 and Affinion's outstanding 13¾%/14½% senior secured PIK/toggle notes due 2018 for equity of Affinion.

Moody's said it deems the exchange of the notes to be a distressed exchange. The /LD designation was temporarily added to the probability of default rating to denote the limited default that occurred on the notes that were exchanged for equity. It will be removed within about three business days.

Concurrently, the agency upgraded the speculate grade liquidity rating to SGL-3 from SGL-4 primarily based on the benefits to be derived from the company's revised capital structure including meaningful reduction in debt service costs and correspondingly stronger cash flow.

Moody's also expects the quality of earnings to improve, with fewer one-time cash charges and better cash flow conversion.

The outlook was changed to stable from negative.

Proceeds from the new $110 million 7½% cash/PIK senior notes due 2018 (unrated) will be used for general working capital purposes, including repaying certain intercompany loans and revolver borrowings, and to pay fees and expenses associated with the exchange offers.

Moody’s upgrades RCHP, debt

Moody's Investors Service said it upgraded RCHP, Inc.'s corporate family rating to B3 from Caa1 and probability of default rating to B3-PD from Caa1-PD.

Moody's also upgraded the instrument ratings on the company's first-lien senior secured debt to B1 from B2 and second-lien senior secured debt to Caa1 from Caa2.

The outlook is stable.

RCHP is a wholly owned subsidiary of RegionalCare Hospital Partners Holdings, Inc.

The upgrade of RCHP's corporate family rating reflects Moody's expectation that revenue and earnings growth at the company's existing hospitals will result in strengthening credit metrics and mitigate the increase in debt associated with the announced acquisition of the company by funds affiliated with private equity firm Apollo Global Management, LLC from the current sponsor, Warburg Pincus.

The agency anticipates that RCHP's debt to EBITDA will steadily decline to closer to 6 times by the end of 2016 from a pro forma level of about 6.8 times following the Apollo acquisition.

Moody’s understands that the current first- and second-lien facilities will be amended and remain in place despite the change in control effected by the acquisition of the equity of the company by Apollo. Members of the company's management team are also expected to maintain an equity ownership interest in the company.

The only expected change in debt associated with the acquisition is the placement of a PIK note at RCHP's parent holding company, RegionalCare Hospital.

S&P lifts Hercules, rates loan CCC+

Standard & Poor’s said it raised the corporate credit rating on Hercules Offshore Inc. to CCC+ from D.

The agency also said it assigned a CCC+ rating to the company’s $450 million first-lien term loan. The recovery rating on this debt is 3, indicating 50% to 70% expected default recovery.

S&P also said it is withdrawing the D ratings on Hercules’ unsecured notes, which have been converted to common equity through the company’s restructuring.

The outlook is negative.

The upgrade reflects Hercules Offshore’s new capital structure post reorganization, S&P said.

The negative outlook reflects an expectation that the company will generate negative cash flow through 2016 and that liquidity will continue to deteriorate, the agency said.

The company’s reorganization converted about $1.2 billion of unsecured debt to equity, S&P said.

The ratings reflect the company’s vulnerable business risk profile and highly leveraged financial risk profile, the agency said.

The ratings also consider the company’s participation in the highly volatile and competitive shallow-water drilling and marine services segments of the oil and gas industry, S&P said.

Moody’s drops Millennium Health PDR to D-PD

Moody's Investors Service said it downgraded Millennium Health LLC's probability of default rating to D-PD from Ca-PD.

The ratings were downgraded because Millennium filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

At the same time, Moody's affirmed the company's corporate family rating and senior secured term loan at Ca.

Following this action, the outlook is stable.

Moody’s rates Soho House Group CFR Caa1

Moody's Investors Service said it assigned a Caa1 corporate family rating and Caa1-PD probability of default rating to Soho House Group Ltd. (Soho House) and withdrew the Caa1 corporate family rating and Caa1-PD probability of default rating on Soho House Bond Ltd.

Concurrently, the agency affirmed the Caa1 rating on the £145 million senior secured notes due 2018 assigned at Soho House Bond.

The outlook is stable.

Moody's said its decision to move the Caa1 corporate family rating and Caa1-PD probability of default rating to Soho House Group from Soho House Bond follows the Oct. 23 announcement of the issuance of £40 million of PIK toggle notes due in October 2019. The PIK notes (unrated) were issued by Soho House Group, which is the top holding company of the group that holds the shares of Soho House Bond, which issued the outstanding senior secured notes in 2013.

The new ratings are therefore assigned at the entity level where the whole debt of Soho House group is consolidated.

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