S&P: OCI Beaumont LLC Downgraded To 'CCC+' On Expected Weaker Credit Metrics; Outlook Stable
At the same time, we lowered our rating on the company's senior secured debt to 'B-' from 'B+'. The recovery rating on the secured debt remains '2', indicating our expectation for substantial recovery (70% to 90%, lower half of the range) in the event of a default.
"The downgrade reflects our view that ongoing weakness in the company's operating performance will result in annual 2016 credit metrics that are significantly weaker than results for the past 12-month period ended June 30, 2016, and well below our previous expectations for 2016," said S&P Global Ratings credit analyst Paul Kurias.
The stable outlook reflects our assumption that management will proactively manage its covenant compliance requirements and refinancing needs. We assume that the credit facilities will be refinanced or have their covenants amended well before the March 2017 maturity of the revolver. The term loan matures in 2019. We believe the company will preserve its cash flow and eliminate distributions to shareholders during a period in which liquidity is strained. We assume the company's unsecured revolver will be available.
We could lower ratings in the next few months if the company does not refinance its credit facilities or amend its covenants in 2016. We could also lower ratings if liquidity tightens further so that we believe sources of funds will be lower than uses. This could happen if operating performance and cash flow deteriorate below our expected levels. Lastly, we could lower the ratings if, against our expectations, the company does not fulfil its interest obligations
We could consider a one-notch upgrade in the next 12 months if the company improves its liquidity position including if the credit facilities are refinanced and covenants amended with sufficient cushions that account for trough-like conditions over the next 12 to 18 months.