Moody's downgrades United Site Services

Moody's Investors Service said it downgraded the corporate family rating of PECF USS Intermediate Holding III Corp. (United Site Services) to Caa1 from B3 and its probability of default rating to Caa1-PD from B3-PD. Moody's also trimmed the company's first-lien senior secured credit facility rating, including $2 billion term loan and $100 million cash flow revolver to B3 from B2, and its senior unsecured $550 million of notes rating to Caa3 from Caa2.

“The downgrade of the CFR to Caa1 from B3 reflects a material deterioration of USS' credit profile since the October 2021 LBO, including Moody's expectation that debt to EBITDA (Moody's adjusted) will be sustained above 8.5 times and a weakened liquidity profile. Despite the company's efforts to pass on higher operating costs to its customers, through an implementation of a fuel and payroll surcharge, Moody's believes that increasing macroeconomic headwinds create uncertainty around the company's ability to improve earnings meaningfully and therefore reduce leverage,” the agency said in a press release.

Moody’s warned that unless the company can flex its capital spending plan and pause its acquisition activity USS’ liquidity sources will continue to dwindle over the next 12-15 months. Higher interest rates, continuing non-operating cash charges and the capital expenditure budget could continue weakening liquidity and raise credit risk.

The outlook remains stable.

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