Pike Corp. 'B' Ratings Affirmed On Improved Credit Measures; Outlook Revised To Stable From Negative

  • Construction, repair, and engineering services provider Pike Corp.'s credit measures have improved, benefitting from good operating performance in 2018, which we expect will continue in 2019.
  • On April 12, 2019, S&P Global Ratings affirmed its 'B' issuer credit rating on Mount Airy, N.C.-based Pike Corp.
  • At the same time, we affirmed our 'B' issue-level rating on the company's term loan.
  • We also revised our ratings outlook to stable from negative, reflecting our expectation that the company will continue to grow EBITDA due to good end-market demand, resulting in stable debt leverage in 2019.
Following stronger-than-expected revenue and earnings growth in 2018, we expect the company's core services will remain strong in 2019 with continued good end-market demand for Pike's services for utility distribution and transmission powerlines and substations. We also anticipate the company's earnings will continue to benefit from high-margin storm work. In 2018, the company demonstrated good project execution, growing its core services revenue even with a substantial amount of storm work completed. The company's credit measures should also continue to benefit from the voluntary debt principal repayments Pike made in 2018.
The stable outlook reflects the company's improving performance and reduction in debt leverage through earnings growth and debt repayment. We expect the company to post continued strong results in 2019, while noting the inherent volatility in storm-related work.
Upside Scenario
We could raise our rating on Pike if the company's leverage remains comfortably below 5x on a sustained basis and FOCF to adjusted debt remains above 5%. In addition, for a higher rating we would also assume the company would maintain credit measures at these levels going forward. This could occur if the company maintains EBITDA margins around 20% and allocates excess cash flow toward debt repayment.
Downside Scenario
Although not likely, we could lower our ratings on Pike during the next 12 months if the company's leverage approaches 6x or if we believe that FOCF to debt were to decline below 2%-3%. We believe this could occur if the company's EBITDA margins deteriorate meaningfully due to uncompetitive pricing or the loss of a key contractual relationship. Alternatively, the company's credit measures could weaken from unanticipated debt-financed transactions.
We work across the world

From London to San Francisco, to our home base in (Saint Helier) Jersey, we’re looking for extraordinary and creative scientists to help us drive the field forward.

Adem Çetinkaya Investment INC (AC Investment Inc.) currently does not act as an equities executing broker or route orders containing equities securities. If AC Invest’s business model were to change and it begins routing non-directed orders in NMS securities, it will comply with the disclosure requirement of Rule 606.

77 Massachusetts Avenue Cambridge, MA 02139 617-253-1000 pr@ademcetinkaya.com