QMax Solutions Inc. Assigned Preliminary 'B-' Rating On Refinancing Transaction And Acquisitive Growth; Outlook Stable


  • QMax Financial Holdings Inc., wholly owned subsidiary of Q'Max Solutions Inc. (guarantor), has commenced an offering for $225 million of senior secured notes due 2024.
  • Sponsor Palladium Equity Partners is contributing $20 million of sponsor equity.
  • We expect QMax to enter into a $150 million secured asset based lending facility (ABL) concurrent with the close of the senior notes.
  • QMax will use proceeds from the senior notes, sponsor equity, and ABL to refinance existing debt and help fund the acquisition growth.
  • We assigned preliminary 'B-' issuer credit ratings to Q'Max Solutions (guarantor) and QMax Financial Holdings (issuer).
  • We assigned a preliminary 'B-' issue level rating and preliminary '3' recovery rating to the company's proposed $225 million senior secured notes.
  • The outlook is stable, reflecting our expectation that Q'Max will benefit from improving international markets and maintain average debt to EBITDA ratio between 5x to 6x and adequate liquidity over the next 12 months.
CENTENNIAL (S&P Global Ratings) May 15, 2019—S&P Global Ratings today took the rating actions listed above. The 'B-' preliminary issuer credit rating on Q'Max reflects the company's small scale and scope of operations, limited product diversity, and exposure to the highly cyclical oilfield services sector. This is partly offset by the company's good geographic footprint, including exposure to large international oil companies that often provide a measure of stability compared to the highly volatile North American market, on-shore and off-shore capabilities, and a diversified customer base. We expect that international drilling activity will continue to improve in 2019, helping to offset uncertain U.S. markets, as the domestic exploration and production (E&P) sector maintains capital discipline despite rising crude oil prices. As a result, our base case anticipates debt leverage will improve to around 5x–6x over the next 12 months as QMax continues to gain business from international markets. Finally, given weak U.S. market conditions (affecting over 70% of 2018 revenues) and improving but still challenging capital markets, the preliminary rating reflects the potential that we could reevaluate the ratings if QMax fails to close on the ABL as expected or has to alter the terms of the senior note issuance.
The stable outlook reflects S&P Global Ratings' expectation that Q'Max will maintain average debt to EBITDA of 5x–6x over the next 12 months. We expect operating and financial performance to be supported by growing offshore and international demand for its products. The outlook also reflects our expectation that Q'Max will maintain adequate liquidity as it funds growth and successfully integrates their acquisition.
We could lower ratings if liquidity significantly weakened with no near-term remedy, or we view debt leverage as unsustainable approaching 7x. Either could occur if crude oil prices fall triggering a pullback in E&P drilling activity, reducing demand for fluids and leading to increased pricing pressures and deteriorating margins and cash flows.
We could raise ratings if Q'Max increases its scale of operations and/or diversity of product offerings in line with 'B' rated peers. This would most likely occur through continued acquisitions that both consolidate market competitors and diversify its operations by product and geography. At the same time, we would expect Q'Max to maintain funds from operations (FFO) to debt comfortably above 12% with adequate liquidity to support business operations.
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.

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