Moody’s cuts Petra Diamonds

Moody’s Investors Service said it downgraded Petra Diamonds Ltd.’s corporate family rating to Caa1 from B3 and its probability of default rating to Caa1-PD from B3-PD. Moody’s also downgraded to Caa1 from B3 the rating on the $650 million guaranteed senior secured second-lien notes due in May 2022 issued by Petra Diamonds US Treasury plc, a wholly owned subsidiary of Petra. The outlook for both entities is stable.

The downgrades reflect the uncertainty in the pace of Petra’s deleveraging trend within the context of a challenging diamond market and volatile global economic conditions. This heightens refinancing risk for Petra ahead of its $650 million notes due 2022, Moody’s said.

Moody’s revised downwards its base case forecast for Petra following the company’s first quarter FY2020 trading update which reported a 23% year-over-year decline in first quarter revenues and a 4% quarter-over-quarter decline in diamond prices. For the fiscal year ended June 30, Petra’s Moody’s adjusted gross debt/EBITDA stood at 5.2x and EBIT/interest expense stood at 0.4x while metrics in FY2020 are forecasted to be 4.7x and 0.8x respectively.

“While Moody’s base case forecast indicates an incremental improvement in credit metrics, the overall improvement in cash flow generation is expected to remain weak because of the operating environment,” the agency said in a press release.

Moody’s upgrades Fastpartner, view to stable

Moody’s Investors Service said it upgraded Fastpartner AB’s corporate family rating to Ba1 from Ba2.

“The upgrade to Ba1 reflects Fastpartner’s continued focus on improving asset quality through acquisitions and redevelopment of properties while maintaining the large exposure towards Stockholm that is benefitting from a currently positive economic environment and strong property fundamentals. The re-building of its portfolio has been done while maintaining a fairly conservative financial profile, exemplified by a Moody’s adjusted debt/asset ratio below 52% and interest cover above 4x,” said Maria Gillholm, a Moody’s vice president, senior credit officer and lead analyst for Fastpartner, in a press release.

“The recent D-share issuance demonstrates Fastpartner’s willingness to adhere to its financial policy while building its portfolio towards higher quality,” said Gillholm.

Moody’s changed the outlook to stable from positive. “The stable outlook reflects our expectation that the company will remain focused on leverage, as measured by total debt/gross assets, to further improve towards or below 50% in the coming quarters, thereby creating a buffer against any future industry downturn, which will likely affect the investment market more quickly than the occupier market, where Fastpartner will continue to profit from healthy rent levels and some progress in reducing vacancies. We also expect the company to continuing to expand its pool of unencumbered assets to above 30% by 2020 when refinancing bank debt by bonds,” Moody’s said.

S&P upgrades Bausch Health

S&P said it upgraded Bausch Health Cos. Inc. to B+ from B and raised the rating on the company’s senior secured debt to BB from BB- and senior unsecured debt rating to B from B-. The recovery ratings remain 1 and 5, respectively.

“The upgrade follows the announcement that Bausch Health has entered into a settlement agreement with the plaintiff’s class action suit in the U.S. securities litigation for $1.21 billion. While the settlement amount is significant, it removes an uncertainty and further demonstrates current management’s ability to resolve legacy management and governance issues. In the meantime, the company has steadily reduced debt, has returned to steady revenue growth, and is projected to generate annual free cash flows of over $1 billion,” said S&P in a press release.

The outlook is stable.

S&P ups Compass notes, revises view upward

S&P said it upgraded Compass Group Diversified Holdings LLC’s senior unsecured notes to B from B- and revised the outlook to positive on reduced debt.

The agency raised the rating on the senior unsecured notes because Compass repaid its term loan improving the recovery prospects for noteholders.

Compass Group significantly lowered its debt burden after selling two of its platform investments this year and repaying debt with the proceeds, including its $500 million term loan B. Compass’ loan to portfolio value has improved to around 35% from above 45% earlier this year, S&P said.

The agency affirmed the B+ rating for Compass and the BB rating on its senior secured revolver. S&P withdrew the BB rating on the term loan because it was fully repaid.

Fitch puts WPX Energy on positive watch

Fitch Ratings said it placed WPX Energy, Inc.’s BB rating on rating watch positive following the announcement of WPX’s proposed acquisition of Delaware Basin assets. Fitch also placed the senior unsecured debt ratings on positive watch and affirmed the senior secured credit facility.

“The rating watch positive considers WPX’s announcement that it was acquiring Delaware Basin assets in a deal valued at approximately $2.5 billion to be funded with new senior unsecured notes, equity to the seller and cash from the balance sheet. The transaction, which adds approximately 58,500 net acres, daily production of 53 mboe/d and 578 mmboe of proved reserves, at YE 2018, largely in Winkler and Ward counties. In total, WPX will have approximately 184,000 Permian acres, total production of 226.4 mboe/d and almost 5,000 Delaware drilling locations. The assets are immediately accretive to WPX’s FCF profile,” said Fitch in a press release.

WPX plans to issue up to $900 million of new senior unsecured notes. At the time of the launch, Fitch will rate the notes BB/RR4 and put the notes on ratings watch positive, consistent with the other unsecured debt ratings. Upon closing of the transaction, which is expected to occur in 2Q20 after a shareholder vote, Fitch said it expects to resolve the positive watch and upgrade WPX’s rating and subsequently all unsecured debt issuances. “Fitch believes WPX’s pro-forma financial and operational profile is in line with the agency’s investment grade thresholds,” the agency said.

S&P puts Cineworld on watch

S&P said it placed its BB- long-term issuer credit and senior secured debt issue ratings on Cineworld Group plc on CreditWatch with negative implications following the company’s offer to acquire Cineplex Inc. for a about $2.2 billion in cash, and plans to sell about $2.3 billion of debt to finance the transaction.

“We anticipate that in 2020-2021, Cineworld's S&P Global Ratings-adjusted leverage will exceed 4.5x on a weighted-average basis. This is an increase on our previous expectation that Cineworld's financial policy would focus on reducing and maintaining adjusted leverage at 4x-4.5x in 2020 and thereafter. The proposed sizable fully debt-financed acquisition of Cineplex comes only two years after the transformative acquisition of Regal in 2018,” said S&P in a press release.

The acquisition would make Cineworld North America’s largest cinema exhibitor and will become somewhat comparable with AMC Entertainment globally, S&P said.

“Substantial free operating cash flow (FOCF) should allow Cineworld to gradually reduce adjusted leverage to less than 5x in 2021 and thereafter. We think that Cineworld will generate substantial FOCF exceeding $450 million-$500 million per year in 2020-2021, and will maintain its dividend policy, provided performance is in line with our base-case expectations in 2020 and 2021,” S&P said.

S&P puts PureGym on watch

S&P said it placed its rating for Pinnacle Bidco plc, which trades as PureGym, on CreditWatch with negative implications. Concurrently, the agency placed the ratings for on the £430 million senior secured notes and its BB- issue rating on the super senior revolving credit facility on CreditWatch with negative implications.

“We placed the rating on CreditWatch negative because PureGym plans to buy Fitness World for an enterprise value of £350 million and pay for it by raising new debt. This acquisition will enable PureGym to expand its operation beyond the U.K.,” said S&P in a press release.

Pro forma the acquisition, S&P estimates the S&P Global Ratings-adjusted leverage (including operating lease debt) at closing could rise above 7x if the entire £350 million purchase price is funded with debt possibly triggering a downgrade. “However, we do not have sufficient information to accurately calculate our credit metrics at this stage. We will therefore review this information before resolving our CreditWatch placement,” S&P said.

Fitch puts TPC Group on watch

Fitch Ratings said it placed TPC Group, Inc.’s ratings on negative watch, including the company’s B- long-term issuer default rating, BB-/RR1 ABL rating and B-/RR4 secured notes rating, following the Nov. 27, Port Neches plant explosion.

“The negative watch reflects heightened cash flow and financial flexibility risks following the Port Neches plant explosion, which resulted in the facility halting operations indefinitely. The incident is recent and many of the details, including short- to medium-term cash outflows, the cost of rebuilding the plant, and insurance outcomes, remain unclear,” said Fitch in a press release.

Fitch sees resolving the watch placement in the first half of next year, once more information becomes available. “The situation is still being monitored and damage assessment is in the very early stages, as the company still does not have access to the plant itself. The plant seems to have sustained significant damage, and Fitch understands that it will take significant time and capital investment in order to resume operations,” the agency said.

S&P changes Cooke Omega view to stable

S&P said it revised the outlook for Cooke Omega Investments Inc. to stable from negative on better-than-expected operating results and affirmed all its ratings on the company.

“We forecast Cooke Omega’s debt-to-EBITDA to improve in the 5x area in the next 12-18 months. The outlook revision reflects our favorable view of the initiatives that Cooke Omega has taken to reduce its inventory backlog from 2018; mitigate the adverse impact from U.S.-China trade tensions by shifting its exposure away from China to Europe; drive manufacturing, and selling, general, and administrative (SG&A) efficiencies; and improve its overall operational performance through 2019,” said S&P in a press release.

The agency also expects Cooke Omega will continue its performance in fiscal 2020. S&P said it forecasts the company to produce revenues of $330 million to $340 million, which is a 10% year-over-year increase, and EBITDA of $70 million to $75 million (on an S&P Global Ratings' adjusted basis) for fiscal 2019.

Moody’s assigns Archrock notes B2

Moody’s Investors Service said it assigned a B2 rating to Archrock Partners, LP’s proposed $400 million senior unsecured notes issue due 2028. The notes are being co-issued by Archrock Partners Finance Corp., a wholly owned subsidiary of Archrock. Proceeds will be used to repay borrowings under the company’s revolving credit facility and for general corporate purposes. None of Archrock’s other ratings are affected by the note offering, S&P said.

The proposed senior notes are rated B2, one notch below the company’s B1 corporate family rating. The notes are guaranteed by Archrock’s parent, Archrock, Inc., which also guarantees the company’s revolving credit facility and its senior unsecured notes due 2027.

The outlook is stable.

S&P rates Archrock notes B+

S&P said it assigned its B+ issue-level rating and 4 recovery rating to Archrock Partners LP’s proposed $400 million senior unsecured notes due in 2028. The 4 recovery rating indicates S&P’s expectation for average (30%-50%; rounded estimate: 40%) recovery in the event of a payment default.

Archrock intends to use the proceeds to refinance a portion of its credit facility balance and for general partnership purposes.

S&P assigns Mangrove, notes B-

S&P said it assigned B- ratings to Mangrove LuxCo III and its senior secured notes with a 4 recovery rating to the notes. The agency also assigned a B+ rating on the company’s super senior revolver and guarantee facility, with a 1 recovery rating.

“Profitability is forecast to recover from low levels, supported by lower restructuring charges and recovery of revenue from Mangrove’s Kelvion subsidiary. We expect the group to improve its profitability notably over the next 12-18 months. Mangrove will reach an S&P Global Ratings pro forma adjusted EBITDA margin of about 5.5% in 2019, which is affected by restructuring and cost optimization charges,” said S&P in a press release.

The agency forecasts the EBITDA margin will increase gradually to more than 6.5% in 2020 and more than 7% in 2021. “The positive development is fueled by lower restructuring charges, the sale or wind-down of its loss-making dry cooling business, benefits from cost optimization program and positive volume effects of Kelvion,” S&P said.

The outlook is stable.

S&P rates Weatherford B-

S&P said it raised its rating on Weatherford International plc to B- from D upon the company’s emergency from bankruptcy.

The agency also assigned a B+ issue-level rating and 1 recovery rating to the company’s $450 million asset-based lending revolving credit facility and $195 million letter of credit facility (both maturing in 2024); and a B- issue-level rating and 3 recovery rating to its $2.1 billion unsecured guaranteed notes due 2024.

“Weatherford’s reorganization includes the elimination of about $6.2 billion of funded debt relative to its pre-bankruptcy levels and envisages no significant change to the company’s business in the oilfield services sector. On a pro forma basis for the revised capital structure, we expect the company’s funds from operations (FFO) to total debt to be about 20% in 2020 and 2021, which compares with less than 0% for the first nine months of 2019,” said S&P in a press release.

The restructuring will cut the company’s annual interest costs by $370 million. S&P expects Weatherford’s debt to EBITDA to be about 2.5x in 2020 and 2021, which compares with 14x before it emerged.

The outlook is negative. “The negative outlook on Weatherford reflects our view that despite the significant reduction in the company’s gross debt, market conditions in the oilfield services sector remain challenging,” S&P said.

Moody’s rates Weatherford notes B2

Moody’s Investors Service said it assigned new ratings to Weatherford International Ltd. following its emergence from bankruptcy, including a B1 corporate family rating, a B1-PD probability of default rating, a Ba2 rating on its secured ABL and letters of credit facilities and a B2 rating on the company’s senior unsecured notes. The outlook is stable.

“Weatherford has a more sustainable capital structure and greater financial flexibility after eliminating over $6.2 billion of debt through a pre-packaged Chapter-11 bankruptcy financial restructuring process during 2019," said Sajjad Alam, a Moody’s senior analyst, in a press release. “While we expect U.S. oilfield services industry conditions to remain weak in 2020, Weatherford should have a relatively stable performance given its significantly lower interest burden, reduced overhead costs, a sizeable liquidity cushion and a diversified international market presence.”

Moody’s rated the $2.1 billion senior unsecured notes B2 because of the significant amount of priority-claim secured debt in Weatherford’s capital structure. The $450 million ABL facility and the $195 million LC facility are both secured by a first-lien claim to Weatherford’s assets and they are rated Ba2. The notes and credit facilities have guarantees from Weatherford International plc, Weatherford International, LL, as well as from most material asset owning subsidiaries, the agency said.

A first-lien claim to certain accounts receivable, inventory and rental tools assets and a second-lien claim to other assets, including real assets secure the ABL facility. A first-lien claim to the non-ABL collateral pool and a second-lien claim to ABL collateral secure the LC facility.

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