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Showing posts from October 3, 2017

Real Estate Company RESIDOMO plans to refinance its capital structure with a new bond and revolving credit facility to reduce financing costs

RESIDOMO owns and manages a portfolio of income-producing residential assets worth about €1.1 billion, in the Moravia-Silesia region of the Czech Republic. RESIDOMO plans to refinance its capital structure with a new bond and revolving credit facility to reduce financing costs, extend maturity, and benefit from higher operational flexibility. We are assigning our preliminary 'BB-' ratings to RESIDOMO and the proposed notes. The stable outlook reflects our expectation of positive revenue growth through rental increases and higher occupancy, stronger EBITDA interest coverage, and debt to debt plus equity reducing to about 70%. RESIDOMO has a relatively small and geographically concentrated residential investment property portfolio in the Moravia-Silesia region of Czech Republic, comprising 43,100 apartments of 2.6 million square meters (sqm) and 1,800 commercial units. The total appraised value of the apartments was Czech koruna (CZK) 28.4 billion (€1.1 billion

PQ Group Holdings Inc. has successfully launched an IPO, raising over $500 million

US–based specialty catalysts, materials, and chemicals company PQ Group Holdings Inc. (parent company to PQ Corp.) has successfully launched an IPO, raising over $500 million in gross proceeds, a transaction that reduces CCMP Capital Advisors L.P.'s ownership share to approximately 45%. PQ Corp. will use proceeds from the transaction to repay the majority of its $525 million unsecured floating-rate notes due 2022, reducing overall balance sheet debt by nearly 20%. We based the stable outlook on our view that PQ will continue to reduce leverage through modest EBITDA growth and free cash flow generation and maintain funds from operations greater than 12% on a weighted-average basis. At the same time, we raised our issue-level ratings on the company's senior secured debt to 'BB-' from 'B+'. The recovery ratings remains '2', indicating our expectation of substantial (70%-90%; rounded estimate: 85%) recovery in the event of payment default

NXT Capital CLO 2017-2 LLC's issuance is a CLO transaction backed primarily by middle-market speculative-grade senior secured term loans

NXT Capital CLO 2017-2 LLC's issuance is a CLO transaction backed primarily by middle-market speculative-grade senior secured term loans that are governed by collateral quality tests. We assigned our preliminary ratings to the class A, B, C, D, and E notes. The preliminary ratings reflect our view of the transaction's diversified collateral pool, credit enhancement, and legal structure, among other factors. The note issuance is a collateralized loan obligation transaction backed primarily by middle-market speculative-grade senior secured term loans that are governed by collateral quality tests. The preliminary ratings are based on information as of Oct. 3, 2017. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: The diversified collateral pool, which consists primarily of middle-market speculative-grade senior secured term loans that are governed by collateral qua

Mariner CLO 2017-4 Ltd./Mariner CLO 2017-4 LLC's issuance is a CLO securitization backed by primarily of broadly syndicated speculative-grade senior secured term loans

Mariner CLO 2017-4 Ltd./Mariner CLO 2017-4 LLC's issuance is a CLO securitization backed by primarily of broadly syndicated speculative-grade senior secured term loans that are governed by collateral quality tests. We assigned our preliminary ratings to the class A, B, C, D, E, and F notes. The preliminary ratings reflect our view of the transaction's diversified collateral pool, credit enhancement, and legal structure, among other factors. The note issuance is collateralized loan obligation securitization backed by primarily of broadly syndicated speculative-grade senior secured term loans that are governed by collateral quality tests. The preliminary ratings are based on information as of Oct. 3, 2017. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect our view of: The diversified collateral pool, which consists primarily of broadly syndicated speculative-gra

The Utopia Pipeline is a new feedstock source for petrochemical companies operating in Ontario

The Utopia Pipeline is a new feedstock source for petrochemical companies operating in Ontario, Canada and a new pipeline outlet for natural gas liquids producers in the Marcellus and Utica basins. The project is a 268-mile, common carrier, Federal Energy Regulation Commission-regulated pipeline, consisting of new build and existing sections, which runs from Ohio to Ontario, with an initial capacity of 50,000 barrels per day (bbl/d) but has been designed for expansion to 75,000 bbl/d. Pipeline construction began in the second quarter of 2017 and is substantially complete, with a target in-service date of Jan. 1, 2018. Nova Chemicals Corp. (BB+/Stable) has entered into a transportation services agreement (TSA) for the majority of the current capacity of the pipeline, which has a remaining term of 21 years under a minimum volume commitment (MVC) arrangement. Through subsidiaries, the Utopia Pipeline is equally owned by Kinder Morgan Inc. (KMI, BBB-/Stable/A-3) and Riverst

El Salvador has completed its Certificates for Pension Investments (CIPs) restructuring.

El Salvador has completed its Certificates for Pension Investments (CIPs) restructuring. We are raising our long-term foreign- and local-currency sovereign credit ratings on El Salvador to 'CCC+' from 'SD' (selective default). We are also raising the short-term rating to 'C' from 'SD'. In addition, we are raising our issue-level rating on the foreign-currency senior unsecured debt to 'CCC+' from 'CCC'. The stable outlook reflects our expectation that El Salvador will maintain effective mechanisms to guarantee its access to liquidity, offset by the absence of broader fiscal agreement, a high debt burden, and limited economic growth. According to the amendments, the restructured CIPs: Have a term of 30 years (instead of 25 years); Include a grace period of three or five years for capital payments; and Modify the interest rates to 2.5%-4.0% (and, beginning in 2022, to 4.5%) from 3.5%-5.5%. The restructured CIPs will

Cinven, CPA Global's (CPA) existing owner, has agreed to sell its ownership interest in CPA Global to financial sponsors Leonard Green & Partners and Partners Group.

Cinven, CPA Global's (CPA) existing owner, has agreed to sell its ownership interest in CPA Global to financial sponsors Leonard Green & Partners and Partners Group. The transaction will include the repayment of CPA's existing debt. We are assigning our preliminary 'B-' corporate credit rating to Capri Acquisitions Bidco Ltd. (Capri), CPA's new parent company. We are also assigning our preliminary 'B-' issue-level rating and '3' recovery rating to the company's proposed secured term loan, which consists of an US$830 million facility and a €250 million facility. The stable outlook reflects our opinion that Capri will maintain funds from operations cash interest cover above 2x, while retaining its leading position in the intellectual property renewals market with healthy revenue growth, stable operating margins, and relatively good free operating cash flow generation. At the same time, we assigned our preliminary 'B-&#

PBF Logistics L.P. has launched a $150 million add-on to the notes.

The company has launched a $150 million add-on to the notes. This brings the total issue amount to $500 million. The company will use net proceeds from the add-on to repay existing borrowings on the credit facility. Our 'BB' issue-level rating and '1' recovery rating on the company's senior secured credit facility are unchanged. The '1' recovery rating reflects our expectation of very high (90%-100%; rounded estimate: 95%) recovery in the event of default. Our 'B+' corporate credit rating and stable outlook on PBF Logistics are also unchanged. The ratings on PBF Logistics L.P. represent the company's limited operating history; small scale; and narrow but growing geographic footprint, and reliance on its partner sponsor, PBF Energy Inc., for most of its revenue. PBF Logistics' short track record as a master limited partnership, as well as its small size, scale, and geographic footprint, limits the current rating.

Beacon Roofing Supply Inc. announced that it has entered into a definitive agreement to purchase Allied Building Products Corp. from current owner CRH PLC for $2.625 billion in cash.

Beacon Roofing Supply Inc. announced that it has entered into a definitive agreement to purchase Allied Building Products Corp. from current owner CRH PLC for $2.625 billion in cash. Beacon will finance the acquisition with $2.27 billion of new debt, including a new $970 million senior secured term loan facility, $1.3 billion in new senior unsecured notes (issued in the name Beacon Escrow Corp. ), additional borrowings under an upsized $1.3 billion asset-based lending (ABL) revolving credit facility, issuance of approximately $400 million in perpetual convertible preferred equity to affiliates of private equity sponsor Clayton Dubilier & Rice LLC (CD&R), and approximately $345 million of common equity issuance. We expect Beacon's pro forma leverage for the transaction--prior to anticipated synergies and including Allied's lease--to be 6.1x (noting our treatment of Beacon's convertible preferred equity as debt per our criteria) from the previous 3.4x

Weight Watchers International Inc.'s 2017 performance has exceeded our expectations

US-based weight-management services provider Weight Watchers International Inc.'s recent performance has exceeded our expectations as improving membership retention rates propel profit growth and result in stronger credit measures. We are raising our corporate credit rating on Weight Watchers to 'B' from 'B-'. We are also raising our issue-level rating on the company's first-lien credit facility to 'B' from 'B-' in conjunction with the corporate credit rating upgrade; and revising the recovery rating to '3' from '4' to reflect better recovery prospects on this debt facility because of improving business fundamentals. The outlook is stable, reflecting our expectations that the company will sustain its positive operating momentum, benefiting from improved digital capabilities and in-person meeting formats that should drive another successful winter recruiting season and help further strengthen debt leverage toward t

United Rentals Inc. has completed its acquisition of Neff Rental LLC and has repaid the company's senior secured second-lien term loan.

U.S. equipment rental company United Rentals Inc. has completed its acquisition of Neff Rental LLC and has repaid the company's senior secured second-lien term loan. Therefore, we are raising our corporate credit rating on Neff to 'BB-' from 'B' (to equalize it with our corporate credit rating on United Rentals) and are removing the rating from CreditWatch, where we placed it with positive implications on July 17, 2017. Subsequently, we are withdrawing our corporate credit rating on Neff at United Rentals' request.

U.S. telecommunications provider Windstream Holdings Inc. recently disclosed that it received a purported notice of default from a noteholder claiming the company violated covenants under the indenture governing its 6.375% senior notes due 2023.

US telecommunications provider Windstream Holdings Inc. recently disclosed that it received a purported notice of default from a noteholder claiming the company violated covenants under the indenture governing its 6.375% senior notes due 2023. We cannot speculate on potential outcomes from the notice. We are affirming all ratings on Windstream, including our 'B' corporate credit rating. The negative outlook continues to reflect uncertainty about performance stemming from intense competition from cable providers and low visibility into the impact of cost-cutting initiatives. Moreover, avenues to address the company's medium-term maturities could be constrained, in our view, absent meaningful improvement in operating performance. The ratings affirmation follows the disclosure that Windstream recently received a purported notice of default from a noteholder claiming that the transfer of certain assets and subsequent lease transaction in connection with the

American University, DC LOCs on the series 1999 and 2003 bonds were replaced with direct-purchase agreements with Wells Fargo (with expiration on Feb. 1, 2018).

The LOCs on the series 1999 and 2003 bonds were replaced with direct-purchase agreements with Wells Fargo (with expiration on Feb. 1, 2018). The series 2008 is now a direct purchase with U.S. Bank (with expiration February 2020). In our opinion, this debt is a contingent liability given the expiration within five years and the put risk associated with the direct-purchase agreements. The 'A-1' rating reflects our view of AU's self-liquidity program. The university has committed several sources of funds, including its working capital and endowment to support its outstanding unenhanced CP program ($125 million is authorized). As of Aug. 31, 2017, AU held cash, fixed-income, and domestic equity assets in excess of $514 million. S&P Global Ratings continues to monitor both the sufficiency and liquidity available on a monthly basis to ensure the university can cover a failed remarketing for the outstanding CP. In our opinion, there is ample liquidity provided thr

ERC Topco Holdings LLC (ERC), operating as Eating Recovery Center, is recapitalizing as part of a leveraged buyout by private equity company CCMP Capital Advisors L.P.

ERC Topco Holdings LLC (ERC), operating as Eating Recovery Center, is recapitalizing as part of a leveraged buyout by private equity company CCMP Capital Advisors L.P. With the new debt financing, we expect pro forma adjusted leverage to be about 8.0x for 2017. We are assigning a 'B-' corporate credit rating to the company. The outlook is stable. At the same time, we are assigning a 'B-' issue-level rating and '3' recovery rating to the first-lien credit facility. Our stable rating outlook reflects our expectation that ERC will deliver strong revenue growth and margin improvement in the next few years supported by stable reimbursement from commercial payors and consistent capacity increases. That said, rapid expansion will suppress free cash flow generation in the coming years. We could lower the rating if the ERC's EBITDA level declined by approximately 25% or more from our expectation, such that it is unable to cover its fixed charg

Quality Care Properties Inc. (QCP) has made little progress toward relieving pressure on its debt service coverage ratio covenant (DSCR) of 1.75x.

Quality Care Properties Inc. (QCP) has made little progress toward relieving pressure on its debt service coverage ratio covenant (DSCR) of 1.75x. We expect the company's covenant cushion to continue to deteriorate as its primary tenant, HCR ManorCare pays substantially reduced rent. Based on our projections, the DSCR covenant could be breached as early as the first quarter of 2018. We are lowering our corporate credit rating to 'B-' from 'B'. All ratings remain on CreditWatch with negative implications given the uncertainty surrounding covenant compliance and resolution of the lease agreement default by its key tenant, HCR ManorCare. At the same time, we are lowering our issue-level rating on the first-lien loan to 'B+' from 'BB-' and our rating on the second-lien notes to 'B' from 'B+'. The downgrade reflects our view that QCP has limited cushion under its existing covenants and a high probability of breaching i

Afflelou, will issue a €30 million super senior revolving credit facility (RCF) and €425 million senior secured fixed and floating rate notes maturing in 2023.

3AB Optique Developpement, a subsidiary of France-based Lion / Seneca France 2 SAS, which operates as optical designer and retailer Afflelou, will issue a €30 million super senior revolving credit facility (RCF) and €425 million senior secured fixed and floating rate notes maturing in 2023. Afflelou will use the net proceeds to repay borrowings under its senior secured notes and senior notes, which have €440 million outstanding and mature in 2019. We are assigning 'BB' issue ratings and a '1+' recovery rating to the proposed super senior RCF, and 'B' issue ratings and a '4' recovery rating to the proposed senior secured fixed and floating rate notes. We are affirming our 'B' corporate credit rating on Afflelou, as well as the ratings on the existing debt facilities. The stable outlook on Afflelou reflects the group's ability to generate profitable growth, despite quite challenging market conditions. 3AB Optique Developpem

Mexican universal bank Banorte has consistently gained market share in the highly competitive Mexican banking system along with sound business stability

The bank's business position has been gradually improving and is supported by its good revenue and business diversification, growing market shares, and positive trend in revenue growth, which provides sound business stability. As of June 30, 2017, Banorte held a 13.3% market share in terms of total consolidated loans (up from 13.1% six months earlier) and 13.9% in terms of total deposits (up from 13.7% at the end of 2016). This has allowed Banorte to become the third-largest bank in Mexico. These factors have prompted us to revise the bank's SACP to 'a-' from 'bbb+'. The ICR on the bank are also supported by its strong internal capital generation and sound financial performance that will keep our risk-adjusted capital (RAC) ratio at around 11.4% over the next 18-24 months. The ratings also account for Banorte's good asset quality, with nonperforming assets (NPAs) and credit losses ratios that are in line with those of the Mexican banking system

In mid-2018, Lloyds Banking Group (Lloyds) plans to complete the formal separation of its banking operations under the U.K.'s ring-fencing requirements.

In mid-2018, Lloyds Banking Group (Lloyds) plans to complete the formal separation of its banking operations under the U.K.'s ring-fencing requirements. Subject to its successful acquisition of a U.K. banking license and U.K. court approval of the associated scheme of transfer, Lloyds Bank Corporate Markets PLC (LBCM) will receive a substantial transfer of business from Lloyds Bank and Bank of Scotland, Lloyds' principal ring-fenced subsidiaries. LBCM will own Lloyds Bank International Ltd. (LBIL), Lloyds' existing Jersey-based bank. In continued anticipation of the completion of this transfer, we are affirming our 'A-/A-2' preliminary ratings on LBCM and LBIL. The negative outlook reflects that on Lloyds, and reflects the risks that we see to the group's creditworthiness if the operating environment becomes much tougher for U.K. banks as the U.K. exits the EU. On July 17, 2017, we assigned our preliminary ratings to LBCM and LBIL based on

SL Green is in the early stages of preleasing its ground up development at One Vanderbilt, an office building adjacent to Grand Central Terminal

SL Green is in the early stages of preleasing its ground up development at One Vanderbilt, an office building adjacent to Grand Central Terminal. To date, SL Green has signed leases with three major tenants for approximately 235,400 square feet. Upon completion (expected in 2020), One Vanderbilt will be the second-tallest tower in New York City totaling 1.6 million-square-feet and is expected to cost approximately $3.2 billion to develop. To date, SL Green has secured a $1.5 billion construction loan for this venture. The company also has mitigated some of the risk through its joint venture with NPS (27.6%) and Hines (1.4%) for aggregate equity to the project totaling no less than $525 million. As of June 30, 2017, our calculated last-12-month debt to EBITDA (including preferred shares, the present value of capitalized leases, and SL Green's prorate share of joint ventures) was slightly elevated at about 8.2x. Based on the company's stated financial policy, we exp

Brinks acquired Maco of Argentina for $209 million and it is in the process of acquiring Temis of France for $71 million.

The Brink's Co. has recently completed a large acquisition and is in the process of completing a second, both of which are primarily debt-financed, and we expect weaker credit metrics to result. Therefore, we are lowering our corporate credit rating on Brink's to 'BB+' from 'BBB-' and removing all of the ratings from CreditWatch, where they were placed with negative implications on July 14, 2017. At the same time, we are lowering our issue-level rating on the company's $525 million revolving credit facility to 'BB+' from 'BBB-' and assigning a '3' recovery rating. We are also assigning a 'BB' issue-level rating to the company's proposed $500 million senior unsecured notes issuance, with a recovery rating of '5', based on the company's proposed capital structure. The stable outlook reflects our belief that the company's credit metrics will remain relatively consistent over the next 12-18 mont

Navicure Inc. and Bain Capital entered into a definitive agreement to acquire provider of claims management solutions ZirMed Inc.

SaaS-based medical claims management and patient payment solutions provider Navicure Inc. and Bain Capital entered into a definitive agreement to acquire provider of claims management solutions ZirMed Inc. The transaction will be financed with a $50 million revolver due 2022 (undrawn at close), a $435 million first lien term loan due 2024, a $185 million second lien term loan due 2025 and an equity infusion from Bain Capital. We expect pro forma leverage will be high and above 8x in 2018. The rating on Navicure reflects its high leverage, which we expect to be over 8x over the next year. Navicure plans to acquire ZirMed as part of the transaction, doubling its size. We believe there are integration risks associated with the transaction and the company will incur restructuring costs and that free cash flow generation to be less than $20 million in 2018. Navicure is a technology company that provides SaaS-based revenue cycle management (RCM) services to health care

Jaguar Land Rover reported a 16% year-on-year volume increase in fiscal 2017.

JLR reported a 16% year-on-year volume increase in fiscal 2017. The introduction of JLR's new models--most recently the F-PACE, New Discovery, and Velar--have supported the group's performance, in our opinion. Nevertheless, we think that the group's revenues remain exposed to potential headwinds in volumes in some of its key markets, particularly in the U.K., given that JLR's volumes have increased by just 3.5% in the first quarter of fiscal 2018. Although we expect volumes to pick up in the remainder of fiscal 2018 and into 2019 on the back of the group's model pipeline, we anticipate that increasing competition from premium carmakers such as BMW, Audi, and Daimler could result in stronger price pressure in some of JLR's mature markets. Overall, we expect average pricing to remain steady since the price uptick on new models will be fully offset by pricing pressure. Furthermore, we believe that sales in China will remain healthy (+30% in first-quart