S&P cuts Capstone, loans

Standard & Poor's said it lowered its corporate credit rating on Capstone Logistics Acquisition Inc. to B- from B.

The outlook is stable.

At the same time, the agency lowered its issue-level ratings on the company's senior secured first-lien term loan to B- from B, on the revolving credit facility to B- from B and on the second-lien term loan to CCC from CCC+. The recovery ratings on these issues are unchanged.

"The downgrade reflects our expectation that Capstone's credit metrics will weaken following its acquisition of Pinnacle, with its debt-to-EBTIDA metric increasing to more than 10x in 2015 and its funds from operations (FFO)-to-debt ratio remaining in the low-single-digit percent area," S&P credit analyst Tatiana Kleiman said in a news release.

The agency said the rating reflects Capstone’s limited scale and scope in the very fragmented and competitive logistics industry and its high debt leverage. Offsetting these risks somewhat are the business' favorable cash flow characteristics, which require little investment in capital expenditures and working capital, and the company's fairly flexible cost structure.

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