Moody’s trims ATI, view to stable

Moody’s Investors Service said it downgraded ATI Holdings Acquisition, Inc.’s corporate family rating to B3 from B2 and the probability of default rating to B3-PD from B2-PD. Moody’s also lowered the company's secured first lien revolver and first-lien term loan to B2 from B1.

The downgrade indicates ATI's persistently high leverage. Moody’s estimates the company's adjusted debt/EBITDA to be about seven times for the last twelve months ended Sept. 30.

“This estimate adds back business optimization costs, which have been significant as the company has been undergoing major restructuring efforts to improve its back-office operations, reduce bad debt expenses and optimize collection of payments for its services. While many of these costs are one-time in nature, there will be some ongoing costs related to maintenance that will continue. Including these costs, adjusted EBITDA would approximate 8.3x for the twelve months ended September 30, 2019,” said Moody’s in a press release.

The agency changed the outlook to stable from negative. The outlook change to stable reflects Moody’s forecast the company's investments and restructuring efforts have stabilized the business and resolved back office challenges. Further, Moody’s said it expects leverage and cash flow will improve as business optimization costs wind down.

S&P cuts Cardinal Health

S&P said it lowered its ratings on Cardinal Health Inc. to BBB from BBB+.

“We are lowering our rating on Cardinal Health Inc. because of the risk that opioid-related litigation could have a material impact on credit metrics. Cardinal’s credit metrics are currently at the higher end of our range for the BBB+ rating,” said S&P in a press release.

“While the ultimate liability to resolve opioid related litigation remains uncertain, we think settlements or judgements to resolve opioid matters could be sizable and will likely exceed the company’s $1.5 billion to $2 billion of debt capacity at the BBB+ rating (assuming that it continues share repurchases at a pace of $350 million annually). For this reason, we see Cardinal’s credit profile as more line with that of BBB-rated, rather than BBB+, peers,” the agency said.

The outlook is stable.

S&P lowers Learfield Communications

S&P lowered the ratings on Learfield Communications LLC and its first-lien debt to B- from B and the rating on is second-lien term loan to CCC from CCC+. The agency also placed the ratings on CreditWatch with negative implications.

“The downgrade and CreditWatch placement reflect a significant deterioration in projected EBITDA and cash flow in 2020, and materially lower liquidity over the next six months. Our B- rating is predicated on Learfield’s ability to integrate IMG College, recover some revenue generation that was disrupted during its recent IMG College merger process and obtain external liquidity and a possible covenant amendment to its credit facility,” said S&P in a press release.

“We could lower the rating further if Learfield’s external financing plans do not adequately address liquidity needs in fiscal 2020 or if it cannot demonstrate a plausible recovery path in fiscal 2021. We expect to resolve the CreditWatch over the next several weeks,” S&P said.

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 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.

Moody’s upgrades JBS

Moody’s Investors Service said it upgraded JBS SA corporate family rating to Ba2 from Ba3 and the senior unsecured ratings of its wholly owned subsidiaries JBS USA Lux SA and JBS Investments II GmbH to Ba2 from Ba3. The rating of the secured term loan under JBS USA Lux was upgraded to Ba1 from Ba2. The outlook is stable.

“The upgrade of JBS’ ratings to Ba2 is supported by the reduction in financial leverage and liquidity risk as a consequence of stronger operating performance and successful liability management initiatives between September 2018 and September 2019 that resulted in the extension of debt maturities and reduced funding costs,” said Moody’s in a press release.

JBS also repaid the normalization agreement, established in May 2018 for a total amount of R$12.2 billion, and originally due in 2021. The full repayment of the normalization agreement released about R$7.8 billion in collateral.

“JBS’ Ba2 ratings are supported by the strength of its global operations as the world’s largest protein producer and its substantial diversification across protein segments, geographies and markets. JBS’ strategy to expand its global footprint into value-added processed food segments has improved its business profile and will lead to more stable and stronger operating margin and cash flow over time. JBS’ robust liquidity position also supports the ratings. The company has a cash balance of $1.9 billion at the end of September 2019, plus $1.9 billion available under committed credit facilities, and no significant debt maturities until at least 2023,” said Moody’s.

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 shifts DXC view to negative

S&P said it revised the outlook for DXC Technology Co. to negative from stable on the company’s decision to sell three of its businesses for about $5 billion cash.

DXC plans to use the proceeds along with free cash flow to pay down debt and give $4.25 billion in shareholder remuneration over the next 10 quarters and invest in its business. The company plans to cut debt by about $2.5 billion keeping leverage at or below 2x.

“In our view, the sizable shareholder reward over the course of 10 quarters reduces the capital otherwise available to further scale digital services and position the company for future growth,” said S&P in a press release.

DXC’s BBB rating is unchanged.

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.

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 Galderma, loans B

S&P said it assigned B ratings to Sunshine Luxembourg VII Sarl (Galderma) and its CHF 3.5 billion equivalent senior secured first-lien term loan B and multi-currency revolving credit facility of CHF 500 million equivalent. The ratings are in line with preliminary ratings S&P assigned in July 2019.

“Our assessment of Galderma’s financial risk profile reflects its financial-sponsor ownership and S&P Global Ratings-adjusted debt to EBITDA of close to 10x in 2020 and 8x-8.5x over 2021 and 2022. Our base case forecasts a gradual deleveraging trend mainly on stronger EBITDA, even if we do not expect adjusted debt-to-EBITDA to slip below 6x over the medium term. We estimate funds from operations (FFO) cash interest coverage of 1.5x-2x post-transaction, improving slightly to above 2x at year-end 2021,” said S&P in a press release.

S&P doesn’t see the company increasing its leverage with acquisitions. The agency sees the company focusing on organic growth.

The outlook is negative. “The negative outlook reflects our view that, considering the current high leverage ratio, there is limited headroom to withstand any deviation from our base case. It also reflects potential volatility in credit metrics associated with execution risks in the company’s strategy,” the agency said.

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.

Moody’s ups Atmos, view to positive

Moody's Investors Service said it upgraded Atmos Energy Corp.'s senior unsecured rating to A1 from A2 and changed the outlook to stable from positive.

“Atmos continues to exhibit a strong set of financial credit metrics, thanks to the continued improvement in rate design that minimizes regulatory lag, a balanced financial policy to fund its capital needs and a manageable dividend policy relative to its peers,” said Robert Petrosino, a Moody’s vice president and senior analyst, in a press release.

The stable outlook mirrors Atmos’ credit supportive regulatory construct and the agency’s expectation that management will continue to employ a balanced fiscal policy that will continue to result in consistent financial performance, including CFO pre-WC to debt ratio in the mid 20% range, Moody’s said.

S&P puts DuPont de Nemours on watch

S&P said it placed the A- rating for DuPont de Nemours Inc. on CreditWatch with negative implications, reflecting the agency’s expectation that it may cut the company’s rating after it sells its nutrition and biosciences business to International Flavors & Fragrances Inc. through a Reverse Morris Trust transaction. The company expects to receive a dividend of about $7.3 billion.

DuPont plans to use about $5 billion of the proceeds to repay debt.

S&P said its view about DuPont’s rating considers the $5 billion debt repayment.

S&P puts International Flavors on watch

S&P said it placed International Flavors & Fragrances Inc. and its senior unsecured ratings on CreditWatch with negative implications on the news the company is merging with Dupont Nemours’ nutrition and biosciences business in a Reverse Morris Trust transaction. The deal values the N&B business at $26.2 billion. DuPont shareholders will own 55.4% of the shares of the new company and IFF shareholders will own 44.6%.

IFF will sell $7.5 billion in debt to fund a one-time $7.3 billion special cash dividend to DuPont, resulting in pro forma 2020 debt to EBITDA just above 4x, up from the agency’s forecast of below 3.5x following the Frutarom acquisition, S&P said.

S&P sees resolving the CreditWatch by the first half of 2020 following a review of the effect of the acquisition on IFF.

DBRS assigns BBB to AltaGas notes

DBRS said it assigned a rating of BBB (low) with a stable trend to AltaGas Ltd.’s C$500 million 2.609% medium-term note offering due Dec. 16, 2022. The rating assigned to these notes is based on the rating of an already-outstanding debt series of the above-mentioned debt instrument. AltaGas intends to use the proceeds to pay down indebtedness under the company’s credit facility and for general corporate purposes.

AltaGas’ ratings reflect its diversified portfolio of regulated utilities and midstream business in the United States and Canada, DBRS said.

Moody’s revises Atrium view upwards

Moody’s Investors Service said it confirmed Atrium European Real Estate Ltd.’s Baa3 long term issuer and senior unsecured ratings and changed the outlook to positive from ratings under review.

This rating action concludes the review for downgrade initiated July 25. The review was initiated following the announcement of a possible acquisition by Gazit-Globe Ltd. (Gazit) of the about 40% share capital of Atrium that is not already owned by Gazit or its subsidiaries. On Oct. 25, the company announced that the Gazit acquisition did not receive the required level needed.

“The positive outlook reflects the company’s moderate 38.9% leverage at 30 June 2019, as measured by Moody’s-adjusted gross debt / total assets, and strong 3.8x Moody’s-adjusted fixed charge coverage. The outlook further reflects Moody’s expectation that the company will continue to generate stable cash flow, maintain good liquidity while keeping high occupancy levels and a balanced growth strategy. Continued progress on the repositioning of the portfolio including a reduction or disposal of the Russian exposure will improve portfolio quality and could lead to a higher rating,” said Moody’s in a press release.

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