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Abaco Energy Technologies LLC Downgraded To 'CCC+'; Outlook Negative On Upcoming Maturity

  • Abaco Energy Technologies LLC has a revolving credit facility due in November 2019 (unrated) and a first-lien term loan due in November 2020.
  • We lowered our rating on Abaco to 'CCC+' from 'B-'. The outlook is negative. In addition, we lowered the issue-level rating to 'CCC+' from 'B-'; the recovery rating on this debt remains '3'.
  • The negative outlook reflects the potential difficulty the company may face in refinancing its credit facility.
NEW YORK (S&P Global Ratings) March 18, 2019—S&P Global Ratings today took the 
rating actions listed above. The negative outlook reflects Abaco's weakening 
liquidity profile with its upcoming credit facility maturity in 2019 
(currently undrawn) and term loan in November 2020 and our view that market 
conditions may make refinancing difficult. The company will face liquidity 
constraints if it is unable to refinance or demonstrate a capacity to retire 
this debt with alternate sources of capital within the year. Moreover, as the 
exploration and production (E&P) industry cuts 2019 capital expenditure 
budgets and rig count we anticipate a modest decline in demand for new stators 
and rotors. Still, we expect the company to generate modest free cash flow and 
leverage to remain at recent historical levels.

The negative outlook reflects our expectation that Abaco could face difficult 
refinancing conditions to address its 2019 revolving facility and November 
2020 term loan maturity. However, with historical metrics including debt to 
EBITDA below 3x, funds from operations (FFO) to debt above 30%, and modest 
free cash flow.

We could lower the rating on Abaco if the company were unable to meet its 
ongoing internal financing needs after potentially losing access to its 
revolving credit facility. We could also lower the rating if it seemed likely 
the company was having difficulty refinancing its 2020 term loan. 

We could revise the rating back to stable or potentially raise the rating if 
the company successfully refinances its 2020 maturity while improving 
liquidity measures including extending the company's revolving credit 
facility.

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