BWX Technologies Inc.'s $400 Million Unsecured Note Rating Lowered To 'BB-' On Upsized Revolver

TORONTO (S&P Global Ratings) March 25, 2020--S&P Global Ratings today lowered its rating on BWX Technologies Inc.'s $400 million unsecured notes due 2026 to 'BB-' from 'BB'. We revised the recovery rating on this debt to '5' from '4', indicating expectations for a modest (10%-30%; round estimate: 25%) recovery in a payment default. The company recently increased its secured revolver (unrated) to $750 million from $500 million, resulting in lower recovery for the unsecured borrowers. The upsized revolver no longer has a Canadian borrower and the maturity has been extended to 2025.
ISSUE RATINGS-RECOVERY ANALYSIS
Key analytical factors:
  • The company's capital structure pro forma for the transaction consists of a $750 million secured revolver due 2025 (unrated), approximately $46 million outstanding term loan A due 2023 issued in the U.S., and approximately $214 million outstanding term loan A issued by Canadian subsidiary, BWXT Canada Ltd. (both unrated and due in 2023), and $400 million unsecured notes due 2026.
  • The Canadian term loan is guaranteed by the U.S. operations.
  • Other key default assumptions include LIBOR of 2.5% and the revolver is 85% drawn.
Simulated default and valuation assumptions:
  • Simulated year of default: 2025
  • EBITDA at emergence: $193 million
  • EBITDA multiple: 5x
Simplified waterfall:
  • Net enterprise value (after 5% administrative costs): $917 million
  • Obligor/nonobligor split: 82%/18%
  • Collateral value available to first-lien creditors: $752 million
  • Total first-lien debt: $635 million
  • Collateral value available to unsecured creditors: $116 million
  • Total unsecured debt: $411 million
  • --Recovery expectations: 10%-30%; rounded estimate: 25%
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