S&P moves NEO Tech view to stable

S&P said it revised the outlook for Natel Engineering Co. LLC (NEO Tech) to stable from negative and affirmed the CCC+ ratings on the company and its first-lien term loan. The loan’s recovery rating is 3.

NEO Tech went to its lenders for two synthetic equity cures to help pass its covenant ratio test when EBITDA was short due to the semiconductor supply chain issues. Almost all the lenders agreed to give NEO Tech the two synthetic equity cures. In exchange for the synthetic equity cures, NEO Tech's interest expense on its first-lien term went up by 125 basis points. Under the facility, the company can use three more equity cures, the agency noted.

“The stable outlook reflects our expectation that NEO Tech's likelihood of default is low over the next 12 months because of the already negotiated synthetic cure for the next quarter and the two regular equity cures in the following two quarters it could use if NEO Tech is not able to pass its covenant ratio due to EBITDA shortfall from the semiconductor supply chain shortage,” S&P said in a press release.

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