OREANDA-NEWS. S&P Global Ratings said today that it has lowered its issue-level ratings on Seattle-based PrimeLine Utility Services LLC's senior secured revolving credit facility and term loan to 'B' from 'B+' and revised its recovery ratings on the facility and term loan to '3' from '2'. The '3' recovery rating indicates our expectation for meaningful (50%-70%; upper half of the range) recovery for lenders in the event of a payment default.

At the same time, we affirmed our 'B' corporate credit rating on the company. The outlook is stable.

"Our ratings on PrimeLine reflect the company's position in the highly fragmented and competitive utility services industry," said S&P Global credit analyst Robyn Shapiro. "Although the company's proposed debt-financed acquisitions of Chainco Power Holdings Inc. and Safeway Construction Enterprises Inc. will improve the diversity of its service offerings and expand its geographic footprint in the U. S., we continue to view PrimeLine's overall scale and geographic and end-market diversity as limited compared with the numerous larger entities in the engineering and construction sector that we rate." We expect the company's adjusted debt-to-EBITDA metric to remain above 5x after the proposed acquisitions; however, we note that PrimeLine's high debt leverage is partly offset by its positive FOCF generation.

The stable outlook reflects our belief that PrimeLine will continue to generate positive FOCF and maintain a FOCF-to-debt ratio in the low-single digit percent range because of the good demand for its maintenance services and its above-average EBITDA margins.

We could lower our ratings on PrimeLine if the company's FOCF turned negative or if we believed that its debt-to-EBITDA metric would trend higher than 6x on a sustained basis. This could occur because of an unexpected decline in the company's maintenance business or from acquisition-related missteps.

We consider an upgrade unlikely because we believe that PrimeLine's financial risk profile will remain highly leveraged under its financial sponsor. This is based on the company's high debt burden relative to its size and our general view of its financial sponsor's appetite for financial risk.