the
distressed company alert
a division of new generation research, inc.
VOLUME 14, NO. 21 | MAY 27, 2016
New Generation Research’s weekly newsletter that monitors
and reports on companies showing signs of financial distress.
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COMPANY
99 Cents Only Stores LLC
Community Health Systems, Inc.
Empire Today, LLC
Jack Cooper Enterprises, Inc.
Laureate Education, Inc.
MSC Software Corporation
NCSG Crane & Heavy Haul Services Ltd.
NewLead Holdings Ltd.
Novetta Solutions, LLC
Spanish Broadcasting System, Inc.
Techniplas, LLC
Teck Resources Limited
Tenet Healthcare Corporation
Tidewater Inc.
Total Safety U.S., Inc. (W3 Co.)
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CATEGORY
Low Rating
Low Rating
Low Rating
Low Rating
Low Rating
Low Rating
Low Rating
Audit Concern
Low Rating
Low Rating
Low Rating
Low Rating
Low Rating
Audit Concern
Low Rating
Profile Updates
Watch List
Bankruptcies
99 Cents Only Stores LLC
On May 24, 2016, S&P Global Ratings lowered its corporate credit rating on 99 Cents Only
Stores LLC to CCC+ from B-, its term loan facility to CCC+ from B- and its $250 million senior
notes to CCC- from CCC. “The downgrade reflects our expectation that 99 Cents Only’s weak
operating performance trends, which have caused liquidity to weaken and credit protection measures
to erode, will persist as it continues to address executional issues that have led to lower customer
traffic amid increased competitive headwinds,” said credit analyst Declan Gargan. “Given our
expectations for operating performance in the next year, we believe the company’s capital structure is
unsustainable and we expect debt to EBITDA to remain over 13.0x and funds from operations
(FFO) to debt to remain at depressed levels, less than 3.0%, in fiscal 2017.”
Profile Highlights on next page…
Volume 14, No. 21 | May 27, 2016
Page | 1
the
distressed company alert
a division of new generation research, inc.
Profile Highlights, continued
Community Health Systems, Inc.
On May 23, 2016, Moody’s Investors
Service downgraded the corporate family
rating of CHS/Community Health Systems,
Inc. to B2 from B1, its probability of default
rating to B2-PD from B1-PD, its senior
secured bank debt and senior secured bonds
to Ba3 from Ba2 and its unsecured notes to
Caa1 from B3. “The downgrade of
Community’s Corporate Family Rating to B2
reflects our expectation that financial leverage
will remain high with debt to EBITDA above
5.5 times over the near term and that
deleveraging to acceptable levels will take
longer than anticipated,” stated Dean Diaz,
Moody’s Senior Vice President. “Further
reduction in leverage will depend on the
company’s ability to successfully turn around
operations at underperforming hospitals and
maximize recently announced asset sales,”
continued Diaz. According to Moody’s, if the
Company is not able to sustain debt to
EBITDA below 6.0 times, the ratings could
be downgraded further.
Empire Today, LLC
On May 20, 2016, S&P Global
Ratings lowered its corporate credit rating on
Empire Today, LLC to CCC from B- as well
as the issue-level ratings on the Company’s
debt instruments. “The rating action reflects
our belief that due to the volatile nature of its
business and accompanying swings in credit
metrics, Empire Today’s refinancing process
is taking longer than we previously expected,”
said Olya Naumova. “We believe the
company is engaged in ongoing discussions
with its revolving facility lender and other
institutions to secure a permanent capital
structure refinancing or pursue other strategic
alternatives. However, we remain cautious on
the timing of executing this transaction ahead
of the revolver’s September maturity.”
Volume 14, No. 21 | May 27, 2016
Jack Cooper Enterprises, Inc.
On May 26, 2016, Moody’s Investors
Service downgraded the ratings of Jack
Cooper Enterprises, Inc., including its
corporate family rating to Caa2 from Caa1,
probability of default rating to Caa2-PD from
Caa1-PD, $375 million senior secured notes
due 2020 to Caa1 from B3 and its $150
million senior unsecured PIK notes due 2019
to Ca from Caa3. According to Moody’s, the
rating action is driven by lower than expected
operating performance, despite progress in
addressing the Company’s operational
challenges, leading to very high leverage and a
weak liquidity position. Moody’s estimates the
Company will likely need to draw on its
revolver to cover its upcoming interest
payment of about $20 million, due to
insufficient cash on hand of $5 million and
negative free cash flow. Moody’s further
states that the downgrade also reflects
Moody’s expectation that liquidity and credit
metrics will remain weak over the next year
(even with planned cost efficiencies), amidst a
softening
demand
environment
for
automobiles and light trucks through 2017.
Laureate Education, Inc.
On May 23, 2016, S&P Global
Ratings lowered its corporate credit rating on
Laureate Education, Inc. to B- from B, its
senior secured revolving credit facility and
term loan to B- from B and its senior
unsecured notes to CCC from CCC+. “The
downgrade reflects our view that Laureate
faces sizeable refinancing risk in 2019 with
debt maturities that could total approximately
$3 billion if there is a maturity acceleration on
its amended term loan,” said S&P Global
Ratings credit analyst Thomas Hartman.
According to S&P Global, they could lower
the corporate credit rating on Laureate further
if the Company’s liquidity weakens and it
won’t be able to repay the remaining portion
of its 2018 debt maturities, or if S&P believes
the Company is unlikely to be able to
refinance or extend its significant 2019 debt
maturities.
Profile Highlights continued on next page…
Page | 2
the
distressed company alert
a division of new generation research, inc.
Profile Highlights, continued
MSC Software Corporation
On May 26, 2016, Moody’s Investors
Service
downgraded
MSC
Software
Corporation’s corporate family rating to B3
from B2, probability of default rating to B3PD from B2-PD and its second lien term loan
rating to Caa2 from Caa1. According to
Moody’s, the downgrade of the corporate
family rating reflects declining revenue and
EBITDA since the Company’s 2014 dividend
recapitalization and the resulting increase in
financial leverage to about 8x. Moody’s
further states that the ratings could be
downgraded if leverage is expected to exceed
8.5x or free cash flow to debt turns negative.
The ratings could also be downgraded if
maintenance revenues were to deteriorate
materially due to competitive pressures or if
liquidity were to weaken substantially.
NCSG Crane & Heavy Haul Services Ltd.
On May 20, 2016, S&P Global
Ratings lowered its long-term corporate credit
rating on NCSG Crane & Heavy Haul Corp.
to CCC+ from B- and its second-lien secured
debt rating to CCC from B-. “The dramatic
deterioration of NCSG’s leverage and cash
flow metrics has caused us to view the
company’s capital structure as unsustainable,”
said S&P Global Ratings credit analyst
Michelle Dathorne. “This, in conjunction with
its tightening liquidity position, is the key
factors underpinning our decision to lower
the rating to ‘CCC+’,” Ms. Dathorne added.
According to S&P Global, the negative
outlook reflects their view of the potential for
continued credit profile deterioration if
NCSG’s cash flow generation falls below
current estimates.
NewLead Holdings Ltd.
In Form 20-F filed on May 25, 2016,
NewLead
Holdings
Ltd.’s
auditor,
EisnerAmper LLP, raised substantial doubt
about the Company’s ability to continue as a
going concern. According to EisnerAmper,
the Company has incurred a net loss and
utilized cash in operating activities for the year
ended December 31, 2015 and as of
December 31, 2015, has both a working
capital deficiency and shareholders’ deficit
and, in addition, is in default on a significant
portion of its outstanding obligations. For the
year ended December 31, 2015, the
Company’s loss from continuing operations
was $40,633,000. As of December 31, 2015,
the Company’s cash and cash equivalents
were $722,000 and the Company had current
liabilities
of
$291,035,000
including
$167,617,000 of debt, lease obligations and
convertible notes in default due on demand,
payable within the next twelve months.
Novetta Solutions, LLC
On May 20, 2016, S&P Global
Ratings downgraded Novetta Solutions,
LLC’s first-lien senior secured debt rating to
B- from B and its second-lien senior secured
debt rating to CCC from CCC+. S&P Global
states that it could further lower the ratings on
Novetta in the next 12 months if the
Company’s revenue and earnings do not
improve as expected due to further delays in
its new contracts and the expansion of its
existing programs or if the Company loses a
major contract, causing its liquidity to
deteriorate. “The stable outlook on Novetta
reflects our expectation that the company’s
credit ratios will improve over the next 12-24
months due to modest revenue and earnings
growth, although they will still be very weak
with a debt-to-EBITDA metric above 9x in
2016,” said S&P Global Ratings credit
Christopher Denicolo.
Profile Highlights continued on next page…
Volume 14, No. 21 | May 27, 2016
Page | 3
the
distressed company alert
a division of new generation research, inc.
Profile Highlights, continued
Spanish Broadcasting System, Inc.
On May 20, 2016, S&P Global
Ratings lowered its corporate credit rating on
Spanish Broadcasting System, Inc. (SBS) to
CCC from CCC+ and its 12.5% senior
secured notes due 2017 to CCC from CCC+.
“The downgrade reflects our view that SBS
will not be able to repay its 12.5% notes due
April 2017, given its inability to incur new
debt due to debt incurrence limitations from
its preferred stock,” said S&P Global Ratings
credit analyst Jawad Hussain. According to
S&P Global, the limitation occurred after the
Company failed to repurchase the preferred
stock in 2013 when it was required to do so.
If the Company is unable to amend this
restriction and refinance its 12.5% notes or
generate enough spectrum sale proceeds to
repay the notes, S&P believes it will face a
payment default in April 2017 when the notes
are due.
Teck Resources Limited
On May 23, 2016, Moody’s Investors
Service assigned a B1 rating to Teck
Resources Limited’s proposed US$1 billion
aggregate principal amount of guaranteed
senior unsecured notes due 2021 and 2024. At
the same time, Moody’s downgraded its
existing senior unsecured debt ratings to Caa1
from B3 reflecting its position in the capital
structure behind the new notes and credit
facilities with respect to claim on collateral at
the guaranteeing subsidiaries level. Proceeds
from the new notes will be used to refinance
existing notes, which mature in 2017, 2018
and 2019, through Teck’s announced tender
offer. According to Moody’s, Teck’s B3 CFR
is driven primarily by expected high leverage
and continuing material free cash flow
consumption due to sizable capital
expenditure requirements and exposure to
weak commodity prices.
Techniplas, LLC
On May 23, 2016, Moody’s Investors
Service downgraded the corporate family
rating of Techniplas, LLC to Caa1 from B3,
its probability of default rating to Caa1-PD
from B3-PD and the rating of the $175
million senior secured notes issued by
Techniplas, LLC and Techniplas Finance
Corp. to Caa2 from Caa1. According to
Moody’s, the downgrade reflects clearly
weaker-than-expected performance during
2015 that left the group with a very weak
financial
profile.
While
Moody’s
acknowledges that operating performance
improved during Q1/2016 coupled with a
more positive full year outlook, they
nevertheless believe that it is unlikely for
Techniplas to achieve credit metrics in line
with the requirements for a B3 rating, in
particular its leverage trending to below 6
times debt/EBITDA over the next few
quarters.
Tenet Healthcare Corporation
On May 20, 2016, Moody’s Investors
Service downgraded the corporate family
rating of Tenet Healthcare Corporation to B2
from B1, probability of default rating to B2PD from B1-PD, senior secured notes rating
to Ba3 from Ba2 and senior unsecured notes
rating to Caa1 from B3. “Tenet’s financial
leverage will remain very high, even as it
recognizes the benefit of recent acquisitions
and portfolio rationalization,” said Dean Diaz,
Moody’s Senior Vice President. “Modest free
cash flow and the need to maintain adequate
liquidity to address litigation exposure will
likely prevent any meaningful debt repayment
in the near term,” continued Diaz. According
to Moody’s, the downgrade of the ratings
reflects Moody’s expectation that Tenet’s debt
to EBITDA less distributions to minority
interests will likely remain above 6.0 times
over the next 12 months.
Profile Highlights continued on next page…
Volume 14, No. 21 | May 27, 2016
Page | 4
the
distressed company alert
a division of new generation research, inc.
Profile Highlights, continued
Tidewater Inc.
In Form 10-K filed on May 26, 2016,
Tidewater Inc.’s auditor, Deloitte & Touche,
LLP, raised substantial doubt about the
Company’s ability to continue as a going
concern. According to Deloitte & Touche, the
Company is in process of negotiating with
lenders to cure an expected covenant violation
and events of default. At March 31, 2016, the
Company was in compliance with all financial
covenants set forth in its debt facilities and
note indentures; however, they are forecasting
that, as early as the quarter ending June 30,
2016, the Company may no longer be in
compliance with the 3.0x minimum interest
coverage ratio requirement contained in its
Revolving Credit and Term Loan Agreement,
the Troms Offshore Debt and the 2013
Senior Note Agreement.
Volume 14, No. 21 | May 27, 2016
Total Safety U.S., Inc. (W3 Co.)
On May 23, 2016, Moody’s Investors
Service downgraded the corporate family
rating of W3 Co., a holding company of Total
Safety U.S., Inc., to Caa3 from Caa1, the
probability of default rating to Caa3-PD from
Caa1-PD, the first lien revolver and term loan
to Caa2 from B3 and the second lien term
loan to Ca from Caa3. According to Moody’s,
the downgrade reflects Moody’s expectation
of further deterioration in Total Safety’s
operating and financial performance driven by
intense pricing pressure and weakening
activity levels, notably in its upstream
business. Moody’s further states that Total
Safety’s weak liquidity profile reflects Moody’s
expectations of minimal unrestricted cash
balances and limited access to its revolver
throughout 2016.
On May 25, 2016, S&P Global
Ratings lowered its corporate credit rating on
W3 Co. to CCC from B-, its first-lien term
loan and revolver to CCC from B- and
second-lien term loan to CC from CCC. “The
downgrade reflects our revised estimates of
the company’s 2016 and 2017 revenues and
EBITDA, following weaker-than-expected
full year 2015 and first quarter 2016 results,”
said S&P Global Ratings credit analyst Kevin
Kwok. “The downturn in the commodities
market since late 2014 damaged the upstream
business segment of W3 Co,” he added.
Page | 5
the
distressed company alert
a division of new generation research, inc.
Category: Low Rating
99 Cents Only Stores LLC
Federal Tax ID: 95-2411605
4000 Union Pacific Avenue
City of Commerce, CA 90023
323 980-8145
SIC: 5331 Variety Stores
Officers:
Stephane Gonthier -- President, C.E.O.
Bradley Lukow -- C.F.O.
Company Website: www.99only.com
Employees: 17,000
Auditor: Ernst & Young LLP
Securities:
11% Senior Notes due 2019; $250,000,000 outstanding (CUSIP: 65440KAB2)
Bank Debt:
First Lien Sr. Secured Term B2 Loan due 2019, $613.8 million / First Lien Sr. Secured ABL Revolver
due 2021, $160.0 million
Business: 99 Cents Only Stores LLC engages in the operation of retail stores in the United States. Its
stores offer consumable products and other household items and seasonal items, as well as domestic
and imported fresh produce, deli, dairy and frozen and refrigerated food products. As of January 29,
2016, the Company operated 391 retail stores, including 283 stores in California, 49 stores in Texas, 38
stores in Arizona and 21 stores in Nevada. It also engages in the wholesale of merchandise to retailers,
distributors and exporters. 99 Cents Cnly Stores LLC is a subsidiary of Number Holdings, Inc.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
01/29/2016
$235.91
$887.39
$1,376.76
$241.85
$1,645.21
01/30/2015
$290.56
$901.40
$1,421.41
$385.08
$1,929.17
Income Statement: ($millions, except per share data)
01/29/2016
01/30/2015
Period
12 months ending 12 months ending
Revenue
$2,003.99
$1,926.95
Net Income
$-241.23
$5.50
01/31/2014
12 months ending
$1,834.50
$-15.00
Event: On May 24, 2016, S&P Global Ratings lowered its corporate credit rating on 99 Cents Only
Stores LLC to CCC+ from B-, its term loan facility to CCC+ from B- and its $250 million senior
notes to CCC- from CCC. “The downgrade reflects our expectation that 99 Cents Only’s weak
operating performance trends, which have caused liquidity to weaken and credit protection measures
to erode, will persist as it continues to address executional issues that have led to lower customer
traffic amid increased competitive headwinds,” said credit analyst Declan Gargan.
Source: S&P
Profile Number: 692-5764
Volume 14, No. 21 | May 27, 2016
Page | 6
the
distressed company alert
a division of new generation research, inc.
Category: Low Rating
Community Health Systems, Inc.
4000 Meridian Boulevard
Franklin, TN 37067
615 465-7000
Federal Tax ID: 13-3893191
SIC: 8062 General Medical and
Surgical Hospitals
Employees: 137,000
Officers:
Wayne T. Smith -- C.E.O.
W. Larry Cash -- President, C.F.O.
Company Website: www.chs.net
Auditor: Deloitte & Touche LLP
Securities:
Ticker: CYH Exchange: NYSE
Common Stock; 112,762,293 shares outstanding as of February 10, 2016 (CUSIP: 203668108)
6 7/8% Senior Notes due 2022; $3,000,000,000 outstanding (CUSIP: 12543DAV2)
8% Senior Notes due 2019; $1,998,830,000 outstanding (CUSIP: 12543DAL4)
7 1/8% Senior Notes due 2020; $1,200,000,000 outstanding (CUSIP: 12543DAQ3)
5 1/8% Senior Secured Notes due 2021; $1,000,000,000 outstanding (CUSIP: 12543DAU4)
Business: Community Health Systems, Inc., together with its subsidiaries, owns, leases and operates
general acute care hospitals in the United States. It offers general acute care, emergency room, general
and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and
rehabilitation services, as well as skilled nursing and home care services. As of February 15, 2016, the
Company owned, leased, or operated 195 affiliated hospitals in 29 states with approximately 30,000
licensed beds.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$3,072.00
$16,822.00
$22,185.00
$5,166.00
$26,861.00
12/31/2014
$3,589.00
$16,681.00
$22,807.00
$5,566.00
$27,421.00
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$19,437.00
$18,639.00
Net Income
$259.00
$260.00
Earnings Per Share
$1.38
$0.82
12/31/2013
12 months ending
$12,819.00
$242.00
$1.52
Event: On May 23, 2016, Moody’s Investors Service downgraded the corporate family rating of
CHS/Community Health Systems, Inc. to B2 from B1, its probability of default rating to B2-PD from
B1-PD, its senior secured bank debt and senior secured bonds to Ba3 from Ba2 and its unsecured
notes to Caa1 from B3. “The downgrade of Community’s Corporate Family Rating to B2 reflects our
expectation that financial leverage will remain high with debt to EBITDA above 5.5 times over the
near term and that deleveraging to acceptable levels will take longer than anticipated,” stated Dean
Diaz, Moody’s Senior Vice President.
Source: Moody’s / Profile Number: 692-6231
Volume 14, No. 21 | May 27, 2016
Page | 7
the
distressed company alert
a division of new generation research, inc.
Category: Low Rating
Empire Today, LLC
333 Northwest Avenue
Northlake, IL 60164
847 583-3000
SIC: 5713 Floor Covering Stores
Officers:
Keith Weinberger -- C.E.O.
Thomas Knapp -- C.F.O.
Company Website: www.empiretoday.com
Employees: 2,000
Securities:
11 3/8% Senior Secured Notes due 2017; $150,000,000 outstanding (CUSIP: 29210QAA5)
Business: Empire Today, LLC distributes and sells installed home furnishings and home
improvements to residential and business customers in the United States. It provides products, such
as carpets, including textures, plushes, friezes, Berbers, loops, wool and indoor outdoor carpets;
hardwood floorings, such as domestic hardwoods, exotic hardwoods and bamboo and cork floorings;
laminate floorings that include wood and ceramic/slate laminates; ceramic tile floorings; textured
wood, and tile and stone vinyl floorings; and window treatments. The Company supplies products for
homes, small businesses, organizations and commercial applications. It also offers on-site consultation
and installation services. Empire Today, LLC was formerly known as Empire Home Services, LLC
and changed its name to Empire Today, LLC in May 2007.
Financials Not Available
Event: On May 20, 2016, S&P Global Ratings lowered its corporate credit rating on Empire Today,
LLC to CCC from B- as well as the issue-level ratings on the Company’s debt instruments. “The
rating action reflects our belief that due to the volatile nature of its business and accompanying swings
in credit metrics, Empire Today’s refinancing process is taking longer than we previously expected,”
said Olya Naumova.
Source: S&P
Profile Number: 692-5528
Volume 14, No. 21 | May 27, 2016
Page | 8
the
distressed company alert
a division of new generation research, inc.
Category: Low Rating
Jack Cooper Holdings Corp. (Jack Cooper
Enterprises, Inc.)
1100 Walnut Street, Suite 2400
Kansas City, MO 64106
816 983-4000
Federal Tax ID: 26-4822446
SIC: 4213 Trucking, Except Local
Employees: 3,988
Officers:
T. Michael Riggs -- C.E.O. & President
Michael S. Testman -- C.F.O.
Jeff Herr -- C.O.O.
Company Website:
www.jackcooper.com
Auditor: KPMG LLP
Securities:
10 1/2% PIK Senior Notes due 2019; $176,760,000 outstanding (CUSIP: 46616WAA6)
9 1/4% Senior Secured Notes due 2020; $375,000,000 outstanding (CUSIP: 466355AE4)
Bank Debt:
First Lien Sr. Secured Revolver due 2018, $100.0 million
Business: Jack Cooper Holdings Corp. provides transportation and logistics services in North
America. The Company offers asset and non-asset based solutions to the new and used vehicle
markets specializing in light vehicle transportation and other logistics services for original equipment
manufacturers (OEMs), fleet ownership companies, remarketers, wholesalers and consignors. As of
March 31, 2016, it offered asset and non-asset based transportation and logistics solutions through a
fleet of 2,347 active rigs and a network of 57 strategically located terminals. Jack Cooper Enterprises,
Inc. is the direct parent of Jack Cooper Holdings Corp.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$134.40
$449.20
$598.50
$74.10
$305.10
12/31/2014
$158.00
$388.00
$574.00
$88.70
$347.00
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$728.60
$783.30
Net Income
$-69.90
$-62.70
12/31/2013
12 months ending
$514.70
$-52.30
Event: On May 26, 2016, Moody’s Investors Service downgraded the ratings of Jack Cooper
Enterprises, Inc., including its corporate family rating to Caa2 from Caa1, probability of default rating
to Caa2-PD from Caa1-PD, $375 million senior secured notes due 2020 to Caa1 from B3 and its $150
million senior unsecured PIK notes due 2019 to Ca from Caa3. According to Moody’s, the rating
action is driven by lower than expected operating performance, despite progress in addressing the
Company’s operational challenges, leading to very high leverage and a weak liquidity position.
Source: Moody’s
Profile Number: 692-5718
Volume 14, No. 21 | May 27, 2016
Page | 9
the
distressed company alert
a division of new generation research, inc.
Category: Low Rating
Laureate Education, Inc.
Federal Tax ID: 52-1492296
650 South Exeter Street
Baltimore, MD 21202
410 843-6100
SIC: 8299 Schools and Educational
Services, not Elsewhere Classified
Officers:
Douglas L. Becker -- Chairman & C.E.O.
Eilif Serck-Hanssen -- C.F.O. & E.V.P.
Employees: 67,800
Company Website: www.laureate.net
Auditor: Pricewaterhouse Coopers LLP
Securities:
9 1/4% Senior Notes due 2019; $1,400,000,000 outstanding (CUSIP: 518613AD6)
Bank Debt:
First Lien Sr. Secured Term B Loan due 2018, $1,860.0 million / First Lien Sr. Secured Revolver due
2018, $250.0 million / First Lien Sr. Secured Term B Loan due 2021, $1,810.0 million / First Lien Sr.
Secured Revolver due 2018, $100.0 million
Business: Laureate Education, Inc. provides undergraduate, master’s and doctoral degree programs in
North America, Latin America, Europe, the Asia Pacific, Africa and the Middle East. The Company
offers programs in various fields, such as business and management, medical and health sciences,
engineering, information technology, architecture, education, law, communications and hospitality
management. Laureate Education, Inc. was formerly known as Sylvan Learning Systems, Inc. and
changed its name to Laureate Education, Inc. in May 2004. Laureate Education, Inc. operates as a
subsidiary of Wengen Alberta, LP.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$1,548.18
$4,318.93
$7,031.94
$1,135.68
$7,439.12
12/31/2014
$1,669.32
$4,253.49
$7,257.70
$1,153.44
$8,358.12
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$4,291.66
$4,414.68
Net Income
$-315.25
$-158.29
Earnings Per Share
$-0.61
$-0.31
12/31/2013
12 months ending
$3,916.88
$-69.68
$-0.16
Event: On May 23, 2016, S&P Global Ratings lowered its corporate credit rating on Laureate
Education, Inc. to B- from B, its senior secured revolving credit facility and term loan to B- from B
and its senior unsecured notes to CCC from CCC+. “The downgrade reflects our view that Laureate
faces sizeable refinancing risk in 2019 with debt maturities that could total approximately $3 billion if
there is a maturity acceleration on its amended term loan,” said S&P Global Ratings credit analyst
Thomas Hartman.
Source: S&P / Profile Number: 692-5886
Volume 14, No. 21 | May 27, 2016
Page | 10
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distressed company alert
a division of new generation research, inc.
Category: Low Rating
MSC Software Corporation
4675 MacArthur Court, Suite 900
Newport Beach,, CA 92660
714 540-8900
Officers:
Dominic J. Gallello -- C.E.O. & President
Federal Tax ID: 95-2239450
SIC: 7372 Prepackaged Software
Employees: 972
Company Website:
www.mscsoftware.com
Bank Debt:
First Lien Sr. Secured Term Loan due 2020, $305.0 million / Second Lien Secured Term Loan due
2021, $120.0 million / First Lien Sr. Secured Revolver due 2019, $10.0 million
Business: MSC Software Corporation designs and develops multidiscipline simulation software
solutions for engineers. The Company offers Adams, a multibody dynamics simulation; Actran, an
acoustic simulation software; Easy5, a controls simulation software; Marc, a nonlinear and
multiphysics software; Digimat, a nonlinear multi-scale material and structure software; SimXpert, a
multidiscipline simulation solution; and Simufact, a welding and forming simulation solution. It also
offers Nastran, a structural and multidiscipline software; Dytran, an explicit nonlinear and fluid
structure interaction software; Fatigue, a fatigue simulation software; Sinda, a thermal software; MSC
One, an expanded products token system; and Smart MidSurface, a mid-surface modeling solution.
MSC Software Corporation was formerly known as MSC.Software Corporation and changed its name
to MSC Software Corporation in 2011.
Financials Not Available
Event: On May 26, 2016, Moody’s Investors Service downgraded MSC Software Corporation’s
corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and its
second lien term loan rating to Caa2 from Caa1. According to Moody’s, the downgrade of the
corporate family rating reflects declining revenue and EBITDA since the Company’s 2014 dividend
recapitalization and the resulting increase in financial leverage to about 8x.
Source: Moody’s
Profile Number: 692-6233
Volume 14, No. 21 | May 27, 2016
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Category: Low Rating
NCSG Crane & Heavy Haul Services Ltd.
817, 53016 Highway 60
Acheson, Alberta
Canada T7X 5A7
780 960-6300
Officers:
Edwards J. Redmond -- President & C.E.O.
Darin R. Coutu -- C.F.O.
SIC: 7353 Heavy Construction
Equipment Rental and Leasing
Employees: 200
Company Website: www.ncsg.com
Securities:
9 1/2% Second Lien Secured Notes due 2019; $305,000,000 outstanding (CUSIP: 62888AAA2)
Bank Debt:
First Lien Sr. Secured ABL Revolver due 2019, $225.0 million
Business: NCSG Crane & Heavy Haul Services Ltd. provides crane rental and heavy haul services in
western North America. It offers specialty cranes, such as mobile folding, gantry and roof top cranes;
and tractors, trailers and hydraulic platform trailers. The Company also provides equipment sale
options. It offers its products for oil and gas, infrastructure, wind energy and mining projects. NCSG
Crane & Heavy Haul Services Ltd. was formerly known as Northern Crane Services Inc. and changed
its name to NCSG Crane & Heavy Haul Services Ltd. in September 2013. The Company is also
known as NCSG Crane & Heavy Haul Services Corp.
Financials Not Available
Event: On May 20, 2016, S&P Global Ratings lowered its long-term corporate credit rating on
NCSG Crane & Heavy Haul Corp. to CCC+ from B- and its second-lien secured debt rating to CCC
from B-. “The dramatic deterioration of NCSG’s leverage and cash flow metrics has caused us to view
the company’s capital structure as unsustainable,” said S&P Global Ratings credit analyst Michelle
Dathorne.
Source: S&P
Profile Number: 692-5800
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Category: Audit Concern
NewLead Holdings Ltd.
SIC: 4412 Deep Sea Foreign
Transportation of Freight
83 Akti Miaouli & Flessa Str.
Piraeus, Greece 185 38
30 213 014 8000
Employees: 39
Officers:
Michail S. Zolotas -- Chairman, President & C.E.O.
Eleni (Lena) Despotopoulou -- C.F.O.
Company Website:
www.newleadholdings.com
Auditor: EisnerAmper LLP
Securities:
Ticker: NEWL
Exchange: OTC
Common Stock; 425,668,806 shares outstanding as of May 12, 2015
Business: NewLead Holdings Ltd. operates as a vertically integrated shipping company worldwide. It
operates dry bulk vessels and oil tanker/asphalt carriers that transport various refined petroleum
products and a range of unpackaged cargo. The Company transports refined products, such as
gasoline bitumen/asphalt and jet fuel; and dry bulk goods, such as iron ore, coal and grains. As of May
24, 2016, its fleet consisted of five dry bulk vessels of a total of 0.22 million dwt; and five oil
tanker/asphalt carriers of a total of 0.02 million dwt. The Company also performs commercial,
technical and operational management services to oil tankers/asphalt carriers. The Company was
formerly known as Aries Maritime Transport Limited and changed its name to NewLead Holdings
Ltd. in December 2009.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$291.04
$0.00
$296.98
$10.00
$121.77
12/31/2014
$247.46
$7.71
$300.44
$11.76
$190.32
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$27.81
$12.64
Net Income
$-97.94
$-65.35
12/31/2013
12 months ending
$7.34
$-158.22
Event: In Form 20-F filed on May 25, 2016, NewLead Holdings Ltd.’s auditor, EisnerAmper LLP,
raised substantial doubt about the Company’s ability to continue as a going concern. According to
EisnerAmper, the Company has incurred a net loss and utilized cash in operating activities for the year
ended December 31, 2015 and as of December 31, 2015, has both a working capital deficiency and
shareholders’ deficit and, in addition, is in default on a significant portion of its outstanding
obligations.
Source: Form 20-F
Profile Number: 692-5862
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Category: Low Rating
Novetta Solutions, LLC
7921 Jones Branch Drive, 5th Floor
McLean, VA 22102
571 282-3000
Officers:
Peter B. LaMontague -- C.E.O.
Scott Gessay -- President
Richard P. Sawchak -- C.F.O.
SIC: 7373 Computer Integrated Systems
Design
Employees: 430
Company Website: www.novetta.com
Bank Debt:
First Lien Sr. Secured Term B Loan due 2022, $200.0 million / First Lien Sr. Secured Term Loan due
2023, $85.0 million / First Lien Sr. Secured Revolver due 2020, $40.0 million
Business: Novetta Solutions, LLC provides analytics software and solutions that detect threat and
fraud and protect high value networks for government and commercial enterprises worldwide. It
offers Cyber Analytics, an advanced network-traffic analytics solution that empowers analysts with
real-time cyber security visibility and awareness; Entity Analytics, which unifies the data scattered
across systems to give a single unified view of the people, organizations, locations and other entities or
things and their relationships in an enterprise; and Multi-INT Analytics, a solution that is designed to
knock down barriers to facilitate access, enhance understanding and improve decision making. The
Company also provides cyber and discovery analytics, data analytics, identity intelligence, open source
intelligence and threat research and interdiction group solutions. It serves national intelligence
agencies, department of defense, department of homeland security, department of justice and
department of state. Novetta Solutions, LLC was formerly known as White Oak Technologies, Inc.
and changed its name to Novetta Solutions, LLC in March 2012.
Financials Not Available
Event: On May 20, 2016, S&P Global Ratings downgraded Novetta Solutions, LLC’s first-lien senior
secured debt rating to B- from B and its second-lien senior secured debt rating to CCC from CCC+.
S&P Global states that it could further lower the ratings on Novetta in the next 12 months if the
Company’s revenue and earnings do not improve as expected due to further delays in its new
contracts and the expansion of its existing programs or if the Company loses a major contract, causing
its liquidity to deteriorate.
Source: S&P
Profile Number: 692-6232
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Category: Low Rating
Spanish Broadcasting System, Inc.
7007 NW 77th Avenue
Miami, FL 33166
305 441-6901
Federal Tax ID: 13-3827791
SIC: 4832 Radio Broadcasting
Stations
Officers:
Raul Alarcon, Jr. -- Chairman, C.E.O. & President
Joseph A. Garcia -- S.E.V.P., C.F.O. & C.A.O.
Employees: 440
Company Website:
www.spanishbroadcasting.com
Auditor: Crowe Horwath LLP
Securities:
Ticker: SBSA Exchange: NASDAQ
Common Stock; 4,166,991 shares outstanding as of March 21, 2016 (CUSIP: 846425833)
Series C Convertible Preferred Stock; 380,000 shares outstanding (CUSIP: 846425783)
12 1/2% Senior Secured Notes due 2017; $275,000,000 outstanding (CUSIP: 846425AN6)
Business: Spanish Broadcasting System, Inc. operates as a Spanish-language media and entertainment
company in the United States. It operates in two segments, Radio and Television. The Company
produces and distributes Spanish-language content, including radio programs, television shows and
music and live entertainment. It owns and operates 20 radio stations in the Los Angeles, New York,
Puerto Rico, Chicago, Miami and San Francisco markets; AIRE radio networks with over 103 affiliate
radio stations; and 3 television stations under the MegaTV brand, as well as has various MegaTV
broadcasting outlets under affiliation or programming agreements.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$170.99
$277.20
$550.29
$57.98
$451.74
12/31/2014
$161.13
$276.00
$526.00
$53.31
$451.81
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$146.90
$146.28
Net Income
$-26.96
$-19.95
Earnings Per Share
$-3.71
$-2.75
12/31/2013
12 months ending
$153.77
$-88.57
$-1.34
Event: On May 20, 2016, S&P Global Ratings lowered its corporate credit rating on Spanish
Broadcasting System Inc. (SBS) to CCC from CCC+ and its 12.5% senior secured notes due 2017 to
CCC from CCC+. “The downgrade reflects our view that SBS will not be able to repay its 12.5%
notes due April 2017, given its inability to incur new debt due to debt incurrence limitations from its
preferred stock,” said S&P Global Ratings credit analyst Jawad Hussain.
Source: S&P
Profile Number: 692-3968
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Category: Low Rating
Techniplas, LLC
N44 W33341 Watertown Plank Road
Nashotah, WI 53028
866 208-8201
Officers:
Kimberly Korth -- C.E.O. & President
Steven Braun -- C.F.O.
SIC: 2671 Packaging Paper and
Plastics Film, Coated and Laminated
Employees: 300
Company Website:
www.techniplasgroup.com
Securities:
10% Senior Secured Notes due 2020; $175,000,000 outstanding (CUSIP: 87854WAA1)
Business: Techniplas, along with its subsidiaries, engages in designing, engineering and
manufacturing plastic products primarily for automotive, industrial, medium and heavy truck,
electrical and mechanical industries. The Company offers custom thermoplastics, thermoset molding
and metal insert parts; and technical plastics components and modules. It serves customers in the
United States and internationally.
Financials Not Available
Event: On May 23, 2016, Moody’s Investors Service downgraded the corporate family rating of
Techniplas, LLC to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD and the
rating of the $175 million senior secured notes issued by Techniplas, LLC and Techniplas Finance
Corp. to Caa2 from Caa1. According to Moody’s, the downgrade reflects clearly weaker-than-expected
performance during 2015 that left the group with a very weak financial profile. While Moody’s
acknowledges that operating performance improved during Q1/2016 coupled with a more positive
full year outlook, they nevertheless believe that it is unlikely for Techniplas to achieve credit metrics in
line with the requirements for a B3 rating, in particular its leverage trending to below 6 times
debt/EBITDA over the next few quarters.
Source: Moody’s
Profile Number: 692-6229
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Category: Low Rating
Teck Resources Limited
SIC: 1081 Metal Mining Services
Suite 3300 - 550 Burrard Street
Vancouver, British Columbia
Canada V6C 0B3
604 699-4000
Employees: 10,000
Company Website: www.teck.com
Officers:
Donald R. Lindsay -- President & C.E.O.
Ian C. Kilgour -- E.V.P. & C.O.O.
Ronald A. Milos -- S.V.P. of Finance & C.F.O.
Auditor: PricewaterhouseCoopers LLP
Securities:
Ticker: TCK Exchange: NYSE
Common Stock; 9,353,470 shares outstanding as of December 31, 2015 (CUSIP: 878742204)
Business: Teck Resources Limited explores, develops and produces natural resources in the
Americas, the Asia Pacific and Europe. The Company’s principal products comprise steelmaking coal;
copper concentrates and refined copper cathodes; refined zinc and zinc concentrates; and lead
concentrates. It also produces molybdenum, gold, silver, germanium, indium and cadmium, as well as
chemicals and fertilizers. The Company was formerly known as Teck Cominco Limited and changed
its name to Teck Resources Limited in April 2009.
Balance Sheet: (C$millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
C$1,726.00
C$9,606.00
C$18,051.00
C$4,805.00
C$34,688.00
12/31/2014
C$2,409.00
C$8,013.00
C$18,003.00
C$4,917.00
C$36,839.00
Income Statement: (C$millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
C$8,259.00
C$8,599.00
Net Income
C$-2,484.00
C$382.00
Earnings Per Share
C$-4.29
C$0.63
Event: On May 23, 2016, Moody’s Investors Service assigned a B1 rating to Teck Resources
Limited’s proposed US$1 billion aggregate principal amount of guaranteed senior unsecured notes due
2021 and 2024. At the same, Moody’s downgraded its existing senior unsecured debt ratings to Caa1
from B3, reflectig its position in the capital structure behind the new notes and credit facilities with
respect to claim on collateral at the guaranteeing subsidiaries level. Proceeds from the new notes will
be used to refinance existing notes, which mature in 2017, 2018 and 2019, through Teck’s announced
tender offer.
Source: Moody’s
Profile Number: 692-6230
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Category: Low Rating
Tenet Healthcare Corporation
1445 Ross Avenue, Suite 1400
Dallas, TX 75202
469 893-2200
Federal Tax ID: 95-2557091
SIC: 8062 General Medical and Surgical
Hospitals
Employees: 134,630
Officers:
Trevor Fetter -- C.E.O. & Chairman
Daniel J. Cancelmi -- C.F.O.
Company Website: www.tenethealth.com
Auditor: Deloitte & Touche LLP
Securities:
Ticker: THC Exchange: NYSE
Common Stock; 98,529,352 shares outstanding as of January 29, 2016
8 1/8% Senior Notes due 2022; $2,799,350,000 outstanding (CUSIP: 88033GCE8)
6 3/4% Senior Notes due 2023; $1,898,300,000 outstanding (CUSIP: 88033GCN8)
6% Senior Secured Notes due 2020; $1,800,000,000 outstanding (CUSIP: 87243QAB2)
Bank Debt:
First Lien Sr. Secured ABL Revolver due 2020, $1,000.0 million / First Lien Sr. Secured Letter of
Credit due 2017, $180.0 million
Business: Tenet Healthcare Corp., through its subsidiaries, owns or operates general hospitals and
related health care facilities serving communities in the United States. The Company operates
rehabilitation hospitals, specialty hospitals, long-term care facilities, psychiatric facilities and medical
office buildings near its general hospitals, as well as ancillary health care businesses.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
12/31/2015
$4,308.00
$14,383.00
$20,458.00
$5,171.00
$23,682.00
12/31/2014
$3,577.00
$11,505.00
$16,765.00
$3,970.00
$17,951.00
Income Statement: ($millions, except per share data)
12/31/2015
12/31/2014
Period
12 months ending 12 months ending
Revenue
$18,634.00
$16,603.00
Net Income
$78.00
$76.00
Earnings Per Share
$-1.41
$0.12
12/31/2013
12 months ending
$11,087.00
$-104.00
$-1.32
Event: On May 20, 2016, Moody’s Investors Service downgraded the corporate family rating of
Tenet Healthcare Corporation to B2 from B1, probability of default rating to B2-PD from B1-PD,
senior secured notes rating to Ba3 from Ba2 and senior unsecured notes rating to Caa1 from B3.
“Tenet’s financial leverage will remain very high, even as it recognizes the benefit of recent
acquisitions and portfolio rationalization,” said Dean Diaz, Moody’s Senior Vice President.
Source: Moody’s
Profile Number: 692-4041
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Category: Audit Concern
Tidewater Inc.
601 Poydras Street, Suite 1500
New Orleans, LA 70130
504 568-1010
Federal Tax ID: 72-0487776
Officers:
Jeffrey M. Plall -- President, C.E.O.
Quinn P. Fanning -- C.F.O.
Jeffrey A. Gorski -- C.O.O. & E.V.P.
Employees: 6,550
SIC: 4400 Water Transportation
Company Website: www.tdw.com
Auditor: Deloitte & Touche LLP
Securities:
Ticker: TDW Exchange: NYSE
Common Stock; 47,067,715 shares outstanding as of May 13, 2016 (CUSIP: 886423102)
Bank Debt:
First Lien Sr. Secured Term A Loan due 2019, $300.0 million / First Lien Sr. Secured Revolver due
2019, $600.0 million
Business: Tidewater Inc. provides offshore service vessels and marine support services through the
operation of a fleet of marine service vessels to the offshore energy industry worldwide. It provides
services in support of offshore exploration, field development and production, including towing of
and anchor handling for mobile offshore drilling units; transporting supplies and personnel necessary
to sustain drilling, workover and production activities; offshore construction, remotely operated
vehicle (ROV) operations, and seismic and subsea support; and various specialized services, such as
pipe and cable laying.
Balance Sheet: ($millions)
Total Current Liabilities
Total Long Term Debt
Total Liabilities
Total Current Assets
Total Assets
03/31/2016
$2,459.13
$0.00
$2,685.00
$1,323.31
$4,990.55
03/31/2015
$482.23
$1,524.30
$2,275.40
$868.82
$4,756.16
Income Statement: ($millions, except per share data)
03/31/2016
03/31/2015
Period
12 months ending 12 months ending
Revenue
$979.06
$1,495.52
Net Income
$-160.38
$-65.35
Earnings Per Share
$-3.41
$-1.34
03/31/2014
12 months ending
$1,435.10
$140.26
$2.84
Event: In Form 10-K filed on May 26, 2016, Tidewater Inc.’s auditor, Deloitte & Touche, LLP,
raised substantial doubt about the Company’s ability to continue as a going concern. According to
Deloitte & Touche, the Company is in process of negotiating with lenders to cure an expected
covenant violation and events of default.
Source: Form 10-K
Profile Number: 692-6228
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Category: Low Rating
Total Safety U.S., Inc. (W3 Co.)
11111 Wilcrest Green Drive, Suite 300
Houston, TX 77042
713 353-7100
Officers:
Troy W. Thacker -- C.E.O. & President
Clinton W. Roeder -- C.F.O.
Paul Tyree -- C.O.O.
SIC: 5084 Industrial Machinery and
Equipment
Employees: 1,560
Company Website:
www.totalsafety.com
Bank Debt:
First Lien Sr. Secured Term B Loan due 2020, $290.0 million / Second Lien Sr. Secured Term Loan
due 2020, $115.0 million / First Lien Sr. Secured Revolver due 2018, $60.0 million;
Business: Total Safety U.S., Inc. provides industrial safety services, strategies, and equipment for
hazardous environments. The Company offers communications solutions in the areas of maintenance,
shutdowns, turnarounds, training, critical confined space scenarios and rescue and emergency
situations; industrial, land-based and offshore respiratory protection and breathing air services; inplant service centers; flare services for oil, natural gas, petro-chemical and pipeline industries; and
emergency response services. It also provides standard and customized industrial safety training and
instruction for a range of workplace requirements; medical management services; gas detection and
monitoring services for upstream, mid-stream, downstream, and mining industries; and fall arrest and
protection services. W3 Co. is the holding company of Total Safety U.S., Inc.
Financials Not Available
Event: On May 23, 2016, Moody’s Investors Service downgraded the corporate family rating of W3
Co., a holding company of Total Safety U.S., Inc., to Caa3 from Caa1, the probability of default rating
to Caa3-PD from Caa1-PD, the first lien revolver and term loan to Caa2 from B3 and the second lien
term loan to Ca from Caa3. According to Moody’s, the downgrade reflects Moody’s expectation of
further deterioration in Total Safety’s operating and financial performance driven by intense pricing
pressure and weakening activity levels, notably in its upstream business.
Source: Moody’s
Profile Number: 692-5713
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Distressed Company Alert Profile Updates
Atlas Energy Holdings Operating (Atlas Resource Partners) – Moody’s Downgrades
On May 20, 2016, Moody’s Investors Service downgraded Atlas Energy Holdings Operating
Company, LLC’s corporate family rating to Ca from Caa1, its probability of default rating to Ca-PD
from Caa1-PD and its senior unsecured notes rating to C from Caa3. “The downgrade reflects our
expectation that Atlas is likely to pursue a significant restructuring in the very near term, given its thin
liquidity, high interest burden, declining production rates and unsustainable capital structure,”
commented John Thieroff, Moody’s Vice President. “Atlas’s ongoing borrowing base redetermination
and our expectation that the company is likely to be materially overdrawn along with the need for
additional covenant relief further support our view that a near term restructuring is likely.”
Previous DCA Event: Low Rating 5/17/2016 (S&P Lowers Ratings)
Camposol S.A. (Camposol Holding Ltd) – S&P Lowers Ratings (Distressed Debt Exchange)
On May 25, 2016, S&P Global Ratings lowered its corporate credit rating on Camposol S.A.
to SD from CC and its $200 million senior unsecured notes to D from CC. According to S&P Global,
the downgrade follows Camposol’s announcement that it will exchange $147.5 million of its $200
million outstanding senior unsecured notes for new 10.5% senior secured notes due 2021. Despite the
enhanced terms and conditions of the new notes--which include a first priority lien and security
interest over certain real estate assets of the Company, a bondholder participation fee of 1%, and a
higher interest rate--S&P views such a transaction as a distressed exchange because the new securities’
maturity extends beyond the original notes’ and the Company conducted the offer upon an
unfavorable liquidity position.
Previous DCA Event: Profile Update 4/15/2016 (S&P Lowers Ratings)
Comstock Resources, Inc. – S&P Lowers Ratings
On May 20, 2016, S&P Global Ratings lowered its issue-level rating on Comstock Resources,
Inc.’s 9.5% senior unsecured notes due 2020 to D from CCC. The issue-level rating on the Company’s
7.75% senior unsecured notes due 2019 remains D, the issue-level rating on its senior secured debt
remains B and its corporate credit rating remains at SD. According to S&P Global, the downgrade of
the 9.5% senior unsecured notes due 2020 follows Comstock’s announcement in its most recent SEC
form 10-Q dated May 4, 2016, that it retired $16.7 million of the 9.5% senior unsecured notes due
2020 along with an additional $64.3 million of the 7.75% senior unsecured notes due 2019 in April
and May for total common equity and cash considerations totaling $9.2 million. S&P views the
transaction as a distressed exchange because at the close of the transaction investors received less than
what was promised on the original securities.
Previous DCA Event: Distressed Debt Exchange 2/4/2016
GenOn Energy, Inc. – S&P Lowers Ratings
On May 24, 2016, S&P Global Ratings lowered its corporate credit rating on GenOn Energy
Inc. and its affiliates GenOn Energy Holdings, Inc., GenOn Americas LLC and GenOn REMA LLC
to CCC from CCC+. At the same time, S&P Global lowered the issue-level ratings on GenOn
Energy, Inc.’s, $1.95 billion senior unsecured notes to CCC+ from B-. According to S&P Global,
GenOn’s credit profile has weakened following a progressively weaker forward power curve due to
depressed natural gas prices, and lower gross margins due to stagnating demand and milder weather
patterns, resulting in an accelerated weakening of financial measures.
Previous DCA Event: Low Rating 3/25/2016 (Moody’s Downgrades)
Profile Updates continued on next page…
Volume 14, No. 21 | May 27, 2016
Page | 21
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Distressed Company Alert Profile Updates, continued
Halcon Resource Corporation – S&P Lowers Ratings
On May 23, 2016, S&P Global Ratings lowered its corporate credit ratings on Halcon
Resource Corporation to D from SD and the senior secured issue-level rating on its third-lien notes
was lowered to D from CCC. According to S&P Global, the ‘D’ corporate credit rating reflects
Halcon’s announcement that it has reached an agreement in principal with a majority of the affected
debt holders to enter into a prepackaged Chapter 11 bankruptcy filing.
Previous DCA Event: Profile Update 5/20/2016 (Prepackaged Chapter 11 Expected)
Hercules Offshore, Inc. –RSA, Prepackaged Chapter 11 Expected
On May 27, 2016, Hercules Offshore, Inc. announced, following a review of its strategic
alternatives that the Company has entered into a Restructuring Support Agreement with lenders
holding approximately 99 percent of the indebtedness under its first lien credit agreement. Under the
terms of the RSA, Hercules and certain of its U.S. subsidiaries will solicit acceptances and rejections of
its pre-packaged Chapter 11 plan from first lien lenders and shareholders, file voluntary Chapter 11
petitions to compromise the Company’s obligations to its first lien lenders and provide a recovery to
its shareholders. The Company has engaged Akin Gump Strauss Hauer & Feld LLP as its legal
counsel, PJT Partners as its financial advisor and FTI Consulting as its restructuring advisor.
Previous DCA Event: Low Rating 4/25/2016 (S&P Lowers Ratings)
Light Tower Rentals, Inc. (LTR Holdco, Inc.) – S&P Lowers Ratings
On May 20, 2016, S&P Global Ratings lowered its corporate credit rating on LTR Holdco,
Inc. to CCC+ from B- and its senior notes to CCC+ from B-. “The downgrade on LTR reflects our
revised estimates of the company’s increased leverage, which we now view as unsustainable,” said
S&P Global Ratings credit analyst Stephen Scovotti.
Previous DCA Event: Low Rating 3/25/2016 (Moody’s Downgrades)
Permian Resources LLC – S&P Updates Ratings
On May 25, 2016, S&P Global Ratings raised its corporate credit rating on Permian
Resources LLC and parent company Permian Resources Holdings LLC to CCC from SD. At the same
time, S&P Global lowered the issue-level rating on the Company’s first-lien debt to B- from B and
second-lien and unsecured notes to CC from CCC-. “The upgrade follows a reassessment of Permian
Resources’ capital structure following the repurchase of about 40% of the original $515 million par
value of its exchangeable junior subordinated notes due 2022 for about 10 cents on the dollar,” said
S&P Global Ratings credit analyst Carin Dehne-Kiley. “Despite the debt reduction, we continue to
view Permian Resources’ leverage as unsustainable, and believe the company could face a liquidity
shortfall next year, absent additional asset sales or an equity infusion,” she added.
Previous DCA Event: Distressed Debt Exchange 5/13/2016
Perpetual Energy Inc. – Moody’s Downgrades
On May 26, 2016, Moody’s Investors Service downgraded Perpetual Energy Inc.’s corporate
family rating to Caa2 from Caa1, probability of default rating to Caa2-PD/LD from Caa1-PD and its
senior unsecured notes rating to Caa3 from Caa2. “The downgrade reflects the drastic reduction in
capital spending to virtually nil leading to continuing production declines, which, with weak AECO
natural gas pricing, will hamper cash flow generation,” said Paresh Chari, Moody’s AVP-Analyst.
Previous DCA Event: Profile Update 5/6/2016 (S&P Lowers Ratings)
Profile Updates continued on next page…
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Distressed Company Alert Profile Updates, continued
SAExploration Holdings, Inc. – S&P Lowers Ratings
On May 20, 2016, S&P Global Ratings lowered its corporate credit rating on SAExploration
Holdings, Inc. to CCC- from B- and its senior secured notes rating to CCC- from B-. “The
downgrade reflects our expectations that SAExploration faces very challenging market conditions in
2016 as a result of the effects of persistently low oil and natural gas prices,” said S&P Global Ratings
credit analyst Aaron McLean. “In addition, the delayed payment of a large receivable contributes to a
serious cash flow shortage leading to our assessment of weak liquidity,” he added.
Previous DCA Event: Low Rating 3/17/2016 (Moody’s Downgrades)
Sungard Availability Services Capital, Inc. – Moody’s Downgrades
On May 24, 2016, Moody’s Investors Service downgraded Sungard Availability Services
Capital, Inc.’s corporate family and probability of default ratings to B3 and B3-PD from B2 and B2PD, respectively. In addition, Moody’s downgraded the ratings on the Company’s $250 million senior
secured revolving credit facility due 2018 and $1.025 billion senior secured term loan due 2019 to B1
from Ba3 and $425 million senior unsecured notes due 2022 to Caa2 from Caa1. According to
Moody’s, the downgrade reflects Moody’s expectation that Availability Services’ profits will continue
to decline through 2016 by over 10%, with stabilization occurring in 2017.
Previous DCA Event: Low Rating 3/7/2016 (S&P Lowers Ratings)
York Risk Services Group, Inc. – Moody’s Downgrades
On May 20, 2016, Moody’s Investors Service downgraded the corporate family rating of York
Risk Services Holding Corp. to Caa1 from B3 based on the Company’s decline in earnings and
weakening credit metrics since the time of its leveraged buyout in late 2014. Moody’s also downgraded
York’s probability of default rating to Caa1-PD from B3-PD, its senior secured credit facility ratings
to B3 from B1 and its senior unsecured notes rating to Caa3 from Caa2. According to Moody’s, the
rating action reflects York’s weak profitability, substantial debt burden and limited interest coverage.
Previous DCA Event: Low Rating 5/5/2016 (S&P Lowers Ratings)
The following companies had their ratings affirmed:
Aurora Diagnostics Holdings, LLC – S&P Global Ratings
Corporate credit rating affirmed at CCC+
Senior unsecured notes rating affirmed at CCCBeazer Homes USA, Inc. – Fitch Ratings
Long-Term IDR affirmed at BSecond lien secured notes affirmed at BBSecond lien secured term loan affirmed at BBSenior unsecured notes affirmed at CCC+
Junior subordinated debt affirmed at CCC
Tops Holding II Corporation – Moody’s Investors Service
Corporate family rating affirmed at B3
Probability of default rating affirmed at B3-PD
Senior unsecured notes due 2018 affirmed at Caa2
Profile Updates continued on next page…
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Distressed Company Alert Profile Updates, continued
The following companies had their ratings upgraded:
Aurora Diagnostics Holdings, LLC – S&P Global Ratings
Term loan B and Delayed draw term loans raised to B- from CCC+
Denbury Resources Inc. – S&P Global Ratings
Corporate credit rating raised to CCC+ from SD
Senior secured revolving credit facility raised to B from CCC
Subordinated debt rating raised to CCC+ from D
TransDigm Group Incorporated – Moody’s Investors Service
Corporate family rating upgraded to B1 from B2
Probability of default rating upgraded to B1-PD from B2-PD
Senior subordinated notes due 2020, 2021, 2022, 2024 and 2025 upgraded to B3 from Caa1
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Distressed Company Alert Watch List
The following companies had their ratings downgraded, but not quite low enough:
Cactus Wellhead, LLC* – S&P Global Ratings
Corporate credit rating lowered to B- from B
First-lien term loan rating lowered to B- from B
Conn’s, Inc.* – Moody’s Investors Service
Corporate family rating downgraded to B1 from Ba3
Probability of default rating downgraded to B1-PD from Ba3-PD
Senior Unsecured Regular Bond/Debenture downgraded to B3 from B2
Granite Acquisition, Inc. (Short Hills, NJ) – Moody’s Investors Service
Corporate family rating downgraded to Ba3 from Ba2
Probability of default rating downgraded to Ba3-PD from Ba2-PD
2nd Lien Senior Secured Bank Credit Facility downgraded to B2 from B1
1st Lien Senior Secured Bank Credit Facility downgraded to Ba3 from Ba2
Hi-Crush Partners LP* – S&P Global Ratings
Corporate credit rating lowered to B- from B+
Senior secured debt rating lowered to B+ from BBHunt Oil Company, Inc. (Dallas, TX) – S&P Global Ratings
Corporate credit rating lowered to BB- from BB+
Kronos Worldwide, Inc.* – Moody’s Investors Service
Corporate family rating downgraded to B1 from Ba3
Probability of default rating downgraded to B1-PD from Ba3-PD
Senior Secured Bank Credit Facility downgraded to B2 from B1
Newpark Resources, Inc. (The Woodlands, TX) – S&P Global Ratings
Corporate credit rating lowered to B- from B+
Senior unsecured convertible notes rating lowered to B from B+
Onsite Rental Group Pty Limited (Australia) – S&P Global Ratings
Corporate credit rating lowered to B- from B
US$320 million, first-lien senior secured term loan B lowered to B- from B
Paradigm Acquisition Corporation (Northbrook, IL) – Moody’s Investors Service
Corporate family rating downgraded to B3 from B2
Probability of default rating downgraded to B3-PD from B2-PD
$25 million senior secured first lien revolving credit facility downgraded to B2 from B1
$222 million senior secured first lien term loan downgraded o B2 from B1
Safeway Inc. (Pleasanton, CA) – Moody’s Investors Service
Notes due 2016, 2017, 2019, 2020, 2021, 2027 and 2031 downgraded to B3 from B2
Safeway Inc. (Pleasanton, CA) – S&P Global Ratings
Notes due 2016, 2017, 2019, 2020, 2021, 2027 and 2031 lowered to B- from B+
Yum! Brands, Inc. (Louisville, KY) – Moody’s Investors Service
Senior Unsecured Regular Bond/Debenture downgraded to B2 from B1
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Distressed Company Alert Watch List, continued
The following (proposed) bonds were assigned below a “B” rating:
MPH Acquisition Holdings LLC (New York, NY) – Moody’s Investors Service
$1.3 billion senior unsecured notes assigned a Caa1 rating
TransDigm Inc.* – S&P Global Ratings
$950 billion senior subordinated notes assigned a CCC+ rating
Trilogy International Partners LLC* – Moody’s Investors Service
Senior Secured Regular Bond/Debenture assigned a Caa1 rating
** Please note that we will not have profiles on the above companies until, or unless, they
qualify for our criteria, which is defined on the last page of this issue.
* Previously profiled in the DCA
Note: On April 28, 2016, the name Standard & Poor’s Ratings Services was changed to S&P Global
Ratings.
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Bankruptcies
The data provided below offers a snapshot of Chapter 7 & Chapter 11 filings that have
occurred since the prior reporting period for which the petitioning company has sales of at least
$1 million. Additional information on companies that have filed for bankruptcy can be found at
BankruptcyData.com.
QRS Recycling of Georgia LLC, Atlanta, GA |
Bankruptcy Date: 5/20/2016
Intervention Energy Holdings, LLC, Denver,
CO | Bankruptcy Date: 5/20/2016
Old Tampa Bay Seafood Company LLC, Saint
Petersburg, FL | Bankruptcy Date: 5/26/2016
Swords Group LLC, Mt. Juliet, TN | Bankruptcy
Date: 5/26/2016
Geopetro Resources Company, San Francisco, CA
| Bankruptcy Date: 5/23/2016
Washington First Financial Group Inc,
Bellevue, WA | Bankruptcy Date: 5/26/2016
Majestic Air Inc, Chatsworth, CA | Bankruptcy
Date: 5/23/2016
D and E General Partnership, Knoxville, TN |
Bankruptcy Date: 5/24/2016
Mahi LLC, Denham Springs, LA | Bankruptcy
Date: 5/24/2016
Iron Bridge Tools Inc, Deerfield Beach, FL |
Bankruptcy Date: 5/25/2016
Eastminster School Inc, Conyers, GA |
Bankruptcy Date: 5/24/2016
New Phoenix Metals Ltd, Greenville, TX |
Bankruptcy Date: 5/26/2016
Apollo Press Inc, Newport News, VA | Bankruptcy 8110 Aero Drive Holdings LLC, San Diego, CA
Date: 5/26/2016
| Bankruptcy Date: 5/25/2016
Bryson Burns Construction Inc, Scotts Valley, CA
| Bankruptcy Date: 5/23/2016
Foodservicewarehousecom LLC, Englewood,
CO | Bankruptcy Date: 5/20/2016
J Bonini Inc DBA Roberts Beverage, Ebensburg,
PA | Bankruptcy Date: 5/24/2016
Network Salon Services LLC, Chicago, IL |
Bankruptcy Date: 5/20/2016
Perseon Corporation, Salt Lake City, UT |
Bankruptcy Date: 5/23/2016
Continental Maritime of San Francisco Inc, San
Francisco, CA | Bankruptcy Date: 5/23/2016
Triple C Flatbed Holdings LLC, Atlanta, GA |
Bankruptcy Date: 5/24/2016
Summit Energy Services Inc, Houston, TX |
Bankruptcy Date: 5/23/2016
Bremen Composites LLC, Bremen, IN |
Bankruptcy Date: 5/23/2016
Bankruptcy information is provided by BankruptcyData.com’s Business Bankruptcy Filing
Data Service. For information on how you can receive a daily file of business bankruptcies
e-mail [email protected].
Volume 14, No. 21 | May 27, 2016
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Alert Categories
The goal of the Distressed Company Alert newsletter is to alert subscribers of significant recent events reported by
U.S. Public Companies indicating possible distress.
The Categories Triggering an Alert:
Default:
A missed interest or principal payment on a debt obligation or the election of a company to not make a
payment during or after the grace period.
Covenant Violation:
A violation of a covenant in an agreement or indenture governing a debt obligation.
Audit Concern:
A qualification as to the Company’s ability to continue as a going concern is reported by its independent
accountants in an annual report.
Low Rating:
A major ratings agency has downgraded a Company’s publicly traded debt or any other rating to below a “B”
rating, indicating vulnerability to default.
Debt at Significant Discount:
The Company’s public debt trades with a current yield or yield-to-maturity in excess of ten points over longterm Treasury bond rate.
Distressed Debt Exchange:
A debt exchange where the principal amount or interest rate is significantly reduced because the issuer is having
difficulty meeting the original terms.
Preferred Dividend Omission:
The Company omits a dividend on its preferred stock.
Miscellaneous
The editors determine a recent event that represents distress or challenges the future prospects of the
Company.
DISCLAIMER: Company Profiles in the Distressed Company Alert are selected by the editors because, in their
opinion, the occurrence of such an event or the existence of such a circumstance is a likely indicator of current
or prospective financial or operating difficulty. The inclusion of a profile suggests the possibility of financial
distress or the possibility that the Company may be of interest to workout professionals for some other reason.
Inclusions do not represent analysis of the condition of the Company or a definitive determination that the Company is in difficulty.
ACCURACY & COVERAGE: The information presented has been obtained from sources believed to be
reliable, but accuracy cannot be guaranteed. Do not rely on the Distressed Company Alert without independent
verification.
Distressed Company Alert is published weekly by New Generation Research, Inc., 1212 Hancock St., Suite LL-15, Quincy, MA 02169
Publisher: George Putnam, III; Editor: Kerry Mastroianni
Subscription Rate: $270.00 for six months or $500.00 per year. For more information, visit www.distressedcompanyalert.com. Other
Publications from New Generation Research, Inc. include Bankruptcy Week--a weekly companion newsletter for BankruptcyData.com;
The Bankruptcy Yearbook and Almanac--an annual compendium of bankruptcy information; The Turnaround Letter—a monthly
investment newsletter. For more information on these publications, e-mail us at [email protected] or call us at (800)
468-3810.
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