S&P rates Target Hospitality notes B

S&P said it assigned a B issuer credit rating to Target Hospitality Corp. and B issue-level rating to the proposed $340 million senior secured notes, which will be issued by the subsidiary, Arrow BidCo LLC.

The recovery rating is 3, indicating 50% to 70% expected default recovery.

The ratings reflect the company's small scale, high revenue concentration to the volatile upstream oil and gas industry, significant customer concentration and limited track record as a public entity, S&P said.

These credit risks are partially offset by Target's low debt leverage, good market position and network density in the Permian basin, S&P said.

The stable outlook reflects an expectation that over the next 12 months the company will grow revenues in the 10% to 15% range and maintain its healthy profit margins as it successfully integrates Target Lodging and Signor.

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