S&P: Algeco Scotsman Global S. a.r. l. Rating Lowered To 'CCC+', Watch Status Revised To Negative, On Merger Termination
OREANDA-NEWS. S&P Global Ratings said today that it lowered its corporate credit rating on modular space provider Algeco Scotsman Global S. a.r. l. to 'CCC+' from 'B-'. At the same time, we lowered the senior secured debt rating to 'CCC+' from 'B-'; the recovery rating is unchanged at '4', indicating our expectation of average (30%-50%; lower half of the range) recovery in the event of default. In addition, we lowered the senior unsecured debt rating to 'CCC-' from 'CCC'; the recovery rating is unchanged at '6', indicating our expectation of negligible (0%-10%) recovery in the event of default. We also revised the CreditWatch status of the ratings to negative from developing. The downgrade is based on the merger termination and our questions about the company's liquidity, which have caused us to re-assess its liquidity as less than sufficient. Algeco Scotsman's asset-based credit facility matures Oct. 1, 2017. The company's revenues and cash flow have been under pressure due to weaker demand and foreign-currency translation losses, trends we expect to continue. As of March 31, 2016, the company had about $1.1 billion drawn (almost the full amount under its borrowing base) on its $1.355 billion asset-based facility. We also believe Algeco Scotsman's financial commitments are unsustainable in the long term due to its very high leverage. We will resolve the CreditWatch placement when we obtain more information about the potential refinancing of the company's asset based facility. If we believe the company is unable to refinance this facility, we could lower ratings further.