Yak Access LLC Outlook Revised To Negative On Weaker-Than-Expected Operating Performance, Ratings Affirmed

  • Specialty equipment leasing and logistics company Yak Access LLC's profitability and financial leverage have underperformed our expectations.
  • Therefore, we are revising our outlook on the company to negative from stable and are affirming our 'B' issuer credit rating.
  • At the same time, we are affirming our 'B' issue-level rating on the company's first-lien term loan and our 'CCC+' issue-level rating on its second-lien term loan.
  • The negative outlook reflects the potential that we could lower our rating over the next 12 months if Yak's S&P-adjusted debt to EBITDA does not improve or if the company generates meaningfully negative free cash flow.
CENTENNIAL (S&P Global Ratings) May 17, 2019--S&P Global Ratings today took the rating actions listed above. Our negative outlook on Yak reflects the company's weaker-than-expected profitability over the past several quarters, which has increased its leverage beyond our previous forecast. The company's S&P-adjusted EBITDA declined in 2018 due largely to a delayed regulatory approval at one significant project and an unfavorable product mix, as a large customer purchased mats from Yak instead of renting them. The company's S&P-adjusted debt to EBITDA was 5.3x as of Dec. 31, 2018, which is significantly higher than our previous expectation of 3.5x. We expect the company to reduce its S&P-adjusted leverage to the 4x-5x range by the end of 2019, mainly by improving its profitability and EBITDA.
Our negative outlook on Yak reflects the company's increased financial leverage over the past few quarters and the risk that further project delays could pressure its utilization rates and cash flow generation. Still, we expect its S&P-adjusted debt to EBITDA to improve to between 4x and 5x in 2019.
We could lower our ratings on Yak Access during the next 12 months if its free cash flow generation turns meaningfully negative and pressures its liquidity. This could occur, for example, because of delays in project start dates or higher-than-anticipated levels of mat purchases. We could also downgrade the company if we expect its S&P-adjusted leverage to exceed 6x over the next 12 months.
We could revise our outlook on Yak Access to stable if the company generates neutral to positive free operating cash flow over the next 12 months and its S&P-adjusted leverage improves below 5x.
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