Moody’s pares United Site Services

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

“The downgrades reflect USS' very high financial leverage, interest coverage as measured by EBITA to interest that Moody's expects will remain below 0.5x in 2024, weakened liquidity and significant underperformance relative to Moody's prior expectations. Without a material improvement in earnings, Moody's believes the high-interest burden will make it increasingly challenging for the company to generate free cash flow to pay down debt to reduce financial leverage,” the agency said in a press release.

The downgrades also reflect concern that the company's capital structure will become progressively unsustainable unless USS can organically grow revenue, reach targeted cost savings and deliver free cash flow in 2024, elevating the risk of a default event such as a distressed debt exchange or bankruptcy filing, Moody’s added.

The outlook is stable.

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