/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/200403.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, April 3, 2020, Vol. 24, No. 93 Headlines 19 HIGHLINE: Sets Bidding Procedures for New York Property 4 HIM FOOD: General Unsecured Creditors to Have 10% Recovery 402-420 METROPOLITAN: Case Summary & 19 Unsecured Creditors ACE MOTOR ACCEPTANCE: April 21 Plan Confirmation Hearing Set ACI WORLDWIDE: Moody's Affirms CFR at Ba3, Outlook Stable ALKU LLC: Moody's Cuts CFR & Senior Secured Rating to B3 ALLIANCE RESOURCE: S&P Downgrades ICR to 'BB-'; Outlook Stable AMERICAN TRAILER: Moody's Cuts Senior Secured Notes to Caa1 ANTERO RESOURCES: S&P Downgrades ICR to 'B-'; Outlook Negative ARCONIC CORP: Fitch Assigns BB+ LT IDR & Alters Outlook to Negative ARR INVESTMENTS: April 16 Plan & Disclosure Hearing Set ARRAY CANADA: S&P Places 'CCC+' ICR on CreditWatch Negative ASP UNIFRAX: Moody's Lowers CFR to Caa1 & Alters Outlook to Stable AT HOME HOLDING: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. AVON PRODUCTS: Moody's Places B1 CFR on Review for Downgrade BAY CIRCLE: Gateway Objects to Disclosure Statement BAY CIRCLE: Nilhan Trustee Objects to Disclosure Statement BAY CIRCLE: Trustee Objects to Thakkars' Disclosure Statement BCPE EMPIRE: S&P Alters Outlook to Negative, Affirms 'B' ICR BDF ACQUISITION: S&P Downgrades ICR to 'CCC+'; Outlook Negative BED BATH & BEYOND: S&P Lowers ICR to 'B+' on Operational Headwinds BIOLASE INC: Reports $17.9 Million Net Loss in 2019 BLUE EAGLE: Jones Buying Gadsden Properties for $25K BRIGHT HORIZONS: S&P Alters Outlook to Negative, Affirms 'BB-' ICR BRITTANYS VILLA: Seeks to Hire Cushner & Associates as Counsel BROWN JORDAN: S&P Downgrades ICR to 'CCC+' Over Coronavirus Impact BRYCE-COLE LLC: U.S. Trustee Unable to Appoint Committee BURLINGTON STONES: Fitch Affirms BB+ LT IDR & Alters Outlook to Neg BURLINGTON STORES: S&P Cuts ICR to 'BB' on Operational Pressures CADENCE BANCORPORATION: S&P Alters Outlook to Neg, Affirms BB+ ICR CAPRI HOLDINGS: Fitch Lowers LongTerm IDR to BB+, Outlook Negative CAROLINA INTEGRATIVE: U.S. Trustee Unable to Appoint Committee CBL & ASSOCIATES: Fitch Lowers LT Issuer Default Rating to CC CENTENNIAL RESOURCE: S&P Lowers ICR to 'CCC+'; Outlook Negative CINEMARK USA: Moody's Alters Outlook on B1 CFR to Negative CIRQUE DU SOLEIL: S&P Lowers ICR to 'CCC-'; Outlook Negative COASTAL HOME: King Objects to Plan & Disclosures COMER ENTERPRISES: April 29 Plan Confirmation Hearing Set CONSIS INTERNATIONAL: Fourth Amended Plan Confirmed by Judge CONTAINER STORE: Moody's Alters Outlook on B2 CFR to Negative CONTINENTAL RESOURCES: S&P Lowers ICR To 'BB+', Outlook Negative COVANTA HOLDING: S&P Downgrades ICR to 'B+'; Outlook Stable COVIA HOLDINGS: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. CYPRESS LAWN: Unsecured Creditors to Get 20% Dividend Over 5 Years DAYCO LLC: S&P Cuts ICR to 'CCC+' on Coronavirus Pandemic Effects DCP MIDSTREAM: S&P Alters Outlook to Negative, Affirms 'BB+' ICR DIGITAL RIVER: Moody's Affirms 'B2' Corp. Family Rating DILLARD INC: Fitch Lowers LT IDR to BB, Outlook Negative DWS CLOTHING: Amended Disclosure Hearing Continued to July 9 ELWOOD ENERGY: Moody's Alters Outlook on Ba1 CFR to Stable EMERALD X: Moody's Cuts CFR to B2, On Review for Downgrade EMPLOYBRIDGE LLC: Moody's Alters Outlook on B2 CFR to Negative EMPLOYBRIDGE LLC: S&P Places 'B' ICR on Watch Negative ENSIGN DRILLING: Moody's Cuts CFR to B3 & Alters Outlook to Neg. EUROPEAN FOREIGN: Sunshine Buying All Assets for $1.7 Million FORM TECHNOLOGIES: S&P Cuts ICR to 'CCC' on Operating Performance FORMING MACHINING: Moody's Cuts CFR to Caa1, Reviews for Downgrade FRONTERA ENERGY: S&P Downgrades ICR to 'B+'; Outlook Negative G-III APPAREL: Moody's Alters Outlook on Ba3 CFR to Negative GARTNER INC: S&P Alters Outlook to Negative, Affirms 'BB' ICR GEORGE S. BASHEN: Greenranger Buying Houston Homestead for $850K GLASS MOUNTAIN: S&P Lowers ICR to 'B-' on Expected Higher Leverage GLOBALTRANZ ENTERPRISES: Moody's Reviews B3 CFR for Downgrade GOOD NOODLES: May 5 Plan & Disclosure Hearing Set GRAN TIERRA: S&P Downgrades ICR to 'B' on Weaker Credit Metrics GRANITE LAKES: U.S. Trustee Unable to Appoint Committee GREEN GLOBAL: Plan of Reorganization Confirmed by Judge HANESBRANDS INC: Moody's Alters Outlook on Ba1 CFR to Negative HI-CRUSH INC: Moody's Cuts CFR to Caa2 & Sr. Unsec. Rating to Caa3 HIGHPOINT RESOURCES: S&P Downgrades ICR to CCC+ on Liquidity Risks HILL & HILL MAINTENANCE: Court Confirms Modified Plan ILLINOIS STAR: April 28 Plan Confirmation Hearing Set INTERNAP TECHNOLOGY: Unsecureds Unimpaired in Prepackaged Plan INTERNATIONAL SEAWAYS: Moody's Puts B3 CFR on Review for Downgrade ISTAR INC: S&P Alters Outlook to Negative, Affirms 'BB' ICR J.T. SHANNON: Unsecureds to be Paid from Asset Net Sale Proceeds JAZZ ACQUISITION: S&P Alters Outlook to Negative, Affirms 'B-' ICR JC PENNEY: Fitch Lowers LongTerm Issuer Default Rating to CCC- JO-ANN STORES: Moody's Cuts CFR to B3 & Alters Outlook to Negative JOSEPH A. BRENNICK: Durkits Buying Conway Property for $410K KAUMANA DRIVE: PCO Files Final Report KLX ENERGY: S&P Lowers ICR to 'CCC+' as Sector Demand Deteriorates LADDER CAPITAL: S&P Cuts ICR to 'BB-' as Risks From COVID-19 Mount LAKE COUNTY SD 187: Moody's Affirms Rating on $3.5MM GOLT Bonds LEGACY JH762: JPMorgan Objects to Disclosure Statement LEVI STRAUSS: Fitch Lowers LongTerm IDR to BB, Outlook Negative LINDBLAD EXPEDITIONS: Moody's Lowers CFR to B3, Outlook Negative LIP INC: Court Approves Disclosure Statement LITHIA MOTORS: Moody's Affirms 'Ba1' CFR, Outlook Stable LITTLE FEET: Plan & Disclosure Hearing Reset to May 14 LOANCORE CAPITAL: S&P Alters Outlook to Neg., Affirms 'B+' ICR MACY'S INC: Fitch Lowers LongTerm IDR to BB+, Outlook Negative MAD DOGG ATHLETICS: To Seek Approval of 51% Plan on June 8 MAG DS: Moody's Assigns B3 CFR & Rates 1st Lien Loans B3 MARTIN CONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors MEDIQUIRE INC: Lasurkar Buying MediQuire India Shares for $43K NCL CORP: Moody's Lowers CFR to Ba2, Outlook Negative NEENAH ENTERPRISES: S&P Cuts ICR to CCC+; Ratings on Watch Negative NEW WAY INVESTMENTS: U.S. Trustee Objects to Plan & Disclosure NOVA CHEMICALS: Moody's Cuts CFR to Ba2 & Sr. Unsec. Rating to Ba3 OASIS PETROLEUM: S&P Downgrades ICR to 'CCC+'; Outlook Negative PASHA GROUP: Moody's Places B3 CFR on Review for Downgrade PATRICK INDUSTRIES: S&P Places 'BB-' ICR on CreditWatch Negative PATTERSON-UTI ENERGY: S&P Downgrades ICR to BB+; Outlook Negative PINNACLE REGIONAL: U.S. Trustee Appoints Creditors' Committee POLYMER ADDITIVES: Moody's Cuts CFR to Caa2; Alters Outlook to Neg. PRECISION DRILLING: Moody's Cuts CFR to B2, Alters Outlook to Neg. RADIAN GROUP: S&P Affirms 'BB+' Issuer Credit Rating; Outlook Neg. ROBERT STANFORD: Montage Buying Talcott Life Policy for $262K ROVIG MINERALS: Unsecureds to Get Net Litigation Trust Proceeds SANUWAVE HEALTH: Incurs $10.4 Million Net Loss in 2019 SCHAEFER AMBULANCE: Unsecured Claims Hiked to $4.1 Million SEARS HOLDINGS: Apex, Basil Vasiliou Removed as Committee Members SENIOR CARE: Key West Selling All Operating Assets for $1.5M SFKR LLC: Islam Buying Two Tyler Properties for $802K SFKR LLC: Islam Buying Tyler Properties for $802K SFKR LLC: Kashi Buying Tyler Commercial Property for $800K SFKR LLC: Kashi Enterprises Buying Tyler Property for $800K SHEPPARD AND SON: Massey/Griffin Buying Cordele Property for $102K SKLARCO LLC: Case Summary & 20 Largest Unsecured Creditors SMARTER TODDLER: Plan to be Funded by $4.5M Business Sale Proceeds SPECTRUM BRANDS: S&P Downgrades ICR to 'B'; Outlook Negative SPIRIT AEROSYSTEMS: S&P Affirms 'BB' ICR; Ratings on Watch Neg. STARWOOD PROPERTY: S&P Downgrades ICR to 'BB-'; Outlook Negative T-MOBILE US: Fitch Assigns BB+ LT IDR & Alters Outlook to Stable T-MOBILE USA: Moody's Cuts Senior Unsecured Rating to Ba3 TALEN ENERGY: S&P Downgrades ICR to 'B'; Outlook Negative TAPESTRY INC: Fitch Lowers LT IDR to BB, Outlook Negative TARWATER REAL ESTATE: Voluntary Chapter 11 Case Summary TECNOGLASS INC: Moody's Places Ba3 CFR on Review for Downgrade TENET HEALTHCARE: Fitch Affirms 'B' IDR & Alters Outlook to Stable TEVOORTWIS DAIRY: May 6 Plan & Disclosure Hearing Set TEVOORTWIS DAIRY: Unsecureds Owed $2M Get $50K Annually for 5 Years TNT UNDERGROUND: May 5 Hearing on Disclosure Statement TRANSDIGM INC: Moody's Places B1 CFR on Review for Downgrade TRI-STATE ENTERPRISES: Unsecureds Will be Paid Over 36 Months TRIBE BUYER: Moody's Lowers CFR to Caa1, Outlook Negative TRIBUNE MEDIA: Court Disallows Robert Henke's Defamation Claims TRIUMPH GROUP: S&P Alters Outlook to Negative, Affirms 'B-' ICR TWO DELUNA: Unsecured Creditors to Recover 100% in 5 Years UNDER ARMOUR: Moody's Lowers CFR to Ba2, Outlook Negative UNION GROVE: Bank of Bartlett Says It's Rejecting Plan URS HOLDCO: Moody's Cuts CFR & Senior Secured Rating to B3 US SHIPPING: Moody's Places B3 CFR on Review for Downgrade US SILICA: Moody's Cuts CFR to Caa1 & Alters Outlook to Stable US STEEL CORP: S&P Lowers ICR to 'B-' on Weaker Cash Flow USA LANDS: Acting U.S. Trustee Objects to Disclosures & Plan VEA INVESTMENTS: U.S. Trustee Objects to Plan & Disclosures VIKING CRUISES: Moody's Lowers CFR to B2, On Review for Downgrade VIRTUAL CITADEL: Allowed to Obtain $7.6-Mil Loan on Final Basis WATERBRIDGE OPERATING: S&P Lowers ICR to 'B-'; Outlook Negative WESTERN MIDSTREAM: S&P Cuts Senior Secured Debt Rating to 'BB+' WHATABRANDS LLC: Moody's Alters Outlook on B1 CFR to Negative WHITING PETROLEUM: Case Summary & 30 Largest Unsecured Creditors WILLIAMS COMMUNICATIONS: Seeks to Hire Hadden & Assoc. as Broker WOODS SEALING: Bankr. Administrator Unable to Appoint Committee YRC WORLDWIDE: Moody's Lowers CFR to Caa1, On Review for Downgrade ZATO INVESTMENTS: MSR Buying All Real Properties for $630K ZENERGY BRANDS: Unsecured Creditors to Have 10% Recovery Under Plan [^] BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles ********* 19 HIGHLINE: Sets Bidding Procedures for New York Property ---------------------------------------------------------- Project 19 Highline, LLC, an affiliate of 19 HighLine Development, LLC, asks the U.S. Bankruptcy Court for the Southern District of New York to authorize the bidding procedures in connection with the auction sale of the real property at 435-437 West 19th Street, New York, New York. The Debtor's estate is functionally comprised of the ownership the Property, which is under construction and development, and most likely has a value less than the lien of the Debtor's senior secured creditor, Churchill Credit Holdings, LLC. Nevertheless, since the Property is located in the vicinity of the Hudson Yards, the Debtor proposes to test the real estate market and auction the Property in conjunction with pursuit of a formal plan process. The Debtor is in the process of revising, and will soon be filing, an amended combined plan and disclosure statement supported by Churchill, predicated upon a sale of the Property. Under the amended plan, the net proceeds of the Sale will be used to satisfy Churchill's secured claim, with any balance to be distributed to other creditors. If Churchill is the successful bidder via a credit bid, Churchill will fund sufficient sums that allow the Debtor to pay administration and priority claims, plus fund a pool of $50,000 for general creditors. By the Motion, the Debtor asks authority to sell the Property to the highest and best offer at the Auction, and to establish procedures for the Sale, including approval of the Bid Procedures. It verily believes the Bid Procedures provide the best avenue to test the market so it is in a position to maximize the value of the Property for the benefit of the entire estate. The Debtor owns a condominium development project located at 435-437 19th Street, New York, New York. The Project is subject to various mortgage liens held by, inter alia, Churchill Real Estate Fund LP. The Property is, at present, a partially re-developed building near the Highline section of midtown Manhattan. The Debtor was founded as a special purpose vehicle for the sole purpose of acquiring and developing the Property. The Project contemplates construction of high end residential condominiums, with a full "sell-out price" of approximately $60 million or more. In February 2018, the Debtor and its affiliate refinanced their existing loans to raise additional capital for the Project. As part of the refinancing, the Debtor received a $4 million mezzanine loan from Churchill to assist in paying Project development and construction costs. Contemporaneously therewith, the Debtor and its affiliate and Churchill entered into three additional loan agreements for loans totaling up to another approximately $36 million: (i) a loan in the principal amount of $23,364,358, made pursuant to that certain Acquisition Loan and Security Agreement, dated as of Feb. 20, 2018; (ii) a loan in the maximum principal amount of up to $11,870,642 to be funded upon the terms and subject to the conditions of that certain Building Loan and Security Agreement, dated as of Feb. 20, 2018, by and between Mortgage Borrower, Lenders and Agent; and (iii) a loan in the maximum principal amount of up to $765,000 to be funded upon the terms and subject to the conditions of that certain Project Loan and Security Agreement, dated as of Feb. 20, 2018, by and between Mortgage Borrower, Lenders and Agent. As of the Petition Date, Churchill asserts accrued but unpaid interest due and owing on account of the combined Mezzanine and Project Loans plus fees, expenses, and protective advances totaling $9,734,474. As a result, Churchill asserts it was owed the total sum of $41,321,819 as of the Petition Date. The various loans were properly secured by a recorded mortgage on the Property as well as by UCC filings that encompassed all of the Debtor's assets. The Project stagnated and remains incomplete. In late 2018, Churchill learned of certain alleged discrepancies with its use of funds. These discrepancies prompted Churchill to issue a notice of default on Aug. 28, 2018. In furtherance of its enforcement rights, Churchill set a date for a U.C.C. foreclosure sale of Development's equity and membership interest in the PropCo Debtor. On the eve of the scheduled U.C.C. sale, Development filed for Chapter 11 relief, triggering the automatic stay. Churchill moved for the appointment of an operating trustee, leading to the Settlement with Development and its investors, and Churchill. Under the terms of the Settlement, pre-ppetition management of Development was removed, and William Henrich of Getzler Henrich & Associates LLC was employed as the Chief Restructuring Officer. Mr. Henrich was charges as the responsible party to act in connection with all matters relating to the bankruptcy case or the Property. Mr. Henrich's first step was to file the Chapter 11 petition for the Debtor, and obtain an Order dated May 13, 2019 authoring the joint administration of the Debtor and Development. Early on, Churchill believed that there was sufficient support from creditors and investors for the internal funding of a plan of reorganization, predicated on a transfer of the Property to Churchill's nominee. In recent weeks, however, that support has waned, leaving the Debtor with the only viable option ofproceeding with an auction sale of the Property. In an attempt to maximize value, the Debtor asks to sell all right, title, and interest in and to the Property (including any development and other rights) under a transparent and robust auction process. In conjunction with the bidding procedures, the Debtor will also ask the appointment of David Schechtman of Meridian Capital Group, LLC, or such other broker that the Debtor hay select to serve as sales agent. A final decision on a sales agent will be made prior to the hearing on the bidding procedures, after an interview process is completed. As part of the Auction, Churchill will be permitted to credit bid its claim up to at least $41.32 million, plus continuing interest. The Debtor will entertain additional bids for the Property to ensure that the Debtor achieves the best price possible. If the Debtor receives at least one Qualified Bid prior to the bid deadline, then the Debtor intends to conduct the Auction to determine the highest and otherwise best offer for the Property. The Debtor submits that the proposed Auction sale follows customary and usual practices for the conduct of a public auction of real property. In compliance with General Order M-3 83, the Debtor addresses potential Extraordinary Provisions seriatim: a. Sale to Insider - This is a public action open to everyone who qualifies under the proposed Bid Procedures. None of the current or former investors or managers of the Debtor are expected to make a bid, although they retain the right to do so, as long as they duly qualify. b. Agreements with Management - There are no agreements with the pre-bankruptcy management of the Debtor or its affiliate. c. Private Sale - The Property is being sold at public auction, not at a private sale. d. Deadlines that Effectively Limit Notice - No notice limitation are contemplated. e. No Good Faith Deposit - All Qualiﬁed Bidders will have to make a deposit of at least $2.1 million. f. Interim Arrangements with Proposed Buyer - There are no interim arrangements with any qualified bidders. g. Use of Proceeds - The Sale proceeds will be distributed in accordance with the amended liquidating Chapter 11 plan to be filed prior to the Sale. h. Tax Exemption - It is contemplated that the closing on the Sale will be implemented through a Chapter 11 Plan, making the transfer of the Property eligible for exemption of New York State and New York City RPT transfer taxes under section 1146(a). i. Record Retention - Following the Sale, the Chief Restructuring Officer will retain any books and records in his possession. j. Sale of Avoidance Actions - The Sale will not include any Chapter 5 avoidance actions. k. Requested Findings as to Successor Liability - At this juncture, the Debtor and its affiliate do not propose to limit a qualiﬁed bidder's successor liability. l. Future Conduct - The Debtor and its affiliate do not aks a determination regarding the effect of conduct or actions that may or will be taken after the date of the Sale Order. m. Requested Findings as to Fraudulent Conveyances - At this juncture, the Debtor and its affiliate do not ask a funding to the effect that the Sale does not constitute a fraudulent conveyance. n. Sale Free and Clear of Unexpired Leases There are no unexpired leases. o. Relief from Bankruptcy Rule 6004(h) - The Debtor and its affiliate presently do not intend to ask relief from the 14-day stay imposed by Rule 6004(h), however they reserve the right to ask such relief in connection with the sale order. The Debtor asks to establish a 45-day period from entry of an Order approving the Bid Procedures as the deadline by which prospective bidders must submit a deposit and executed terms and conditions of sale of the Property and agreement to be bound thereby. The Bid Procedures provide for potential bidders to conduct due diligence until the Bid Deadline. To be a Qualified Bidder, a party must submit a Qualified Bid of at least $42 million. Within two business days after conclusion of the Auction, the Successful Bidder will deliver to the Debtor's counsel, an amount no less than $2.15 million or 5% of such Successful Bid minus the Qualifying Deposit plus the Buyer's Premium. The Debtor asks to establish an Auction date no later than five days after the Bid Deadline. If it does not receive a Qualified Bid, then it will not proceed with the Auction and will ask approval of a sale to Churchill on account of its credit bid at the hearing scheduled to consider confirmation of the Debtor's proposed plan. If the Debtor receives at least one Qualified Bid, then the Debtor proposes to conduct a competitive Auction. It asks that the Court schedules a Sale Hearing to conﬁrm the results of the Auction shortly after the Auction is concluded. The Property being sold "as is, where is," "with all faults," without any representations, covenants, guarantees, or warranties of any kind or nature, and tree and clear of any liens, claims, or encumbrances of whatever kind or nature, with such liens, if any, to attach to the proceeds of sale. The Debtor also respectfully asks that the Court approves the manner of notice of the proposed Auction and Sale Hearing. It submits that thfi relief will facilitate the sale process and enable the Debtor to provide interested parties with adequate and sufficient notice of the Auction and related matters. To begin with, the Debtor proposes to give notice of the Bid Procedures Order, the Auction, and the Sale Hearing to all creditors and interested parties. Additionally, the Sales Agent will advertise the Auction in a national newspaper, local real estate publications and will establish and populate a designated drop box containing all necessary information for appropriate due diligence. A copy of the Bidding Procedures and Terms of Sale is available at https://tinyurl.com/yx7jenak from PacerMonitor.com free of charge. About 19 Highline Development and Project 19 Highline 19 Highline Development LLC owns a 100% membership interest in Project 19 Highline Development LLC, which owns a condominium development project located at 435-437 19th Street, New York. The project contemplates construction of high-end residential condominiums, with a full "sell-out price" of approximately $60 million. 19 Highline Development sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Case No. 18-12714) on Sept. 7, 2018. On April 5, 2019, Project 19 Highline LLC filed a Chapter 11 petition (Bankr. S.D.N.Y. Case No. 19-11068). At the time of the filing, 19 Highline had estimated assets of between $10 million and $50 million and liabilities of between $1 million and $10 million. Meanwhile, Project 19 Highline disclosed $55 million in assets and $40.46 million in liabilities. The cases are assigned to Judge Michael E. Wiles. Goldberg Weprin Finkel Goldstein LLP is the Debtors' legal counsel. 4 HIM FOOD: General Unsecured Creditors to Have 10% Recovery ------------------------------------------------------------ Debtor 4 Him Food Group, LLC, filed with the U.S. Bankruptcy Court for the District of Oregon a Disclosure Statement regarding the Plan of Liquidation dated March 20, 2020. Substantially all of the Debtor's assets were sold in December 2019, pursuant to an order of the Court. The proposed Plan distributes the net proceeds of that sale, among other things. Under the Plan, holders of Administrative and Priority Claims against the Debtor will be paid in full, in cash. General unsecured creditors can choose to receive a pro-rata distribution in connection with their claims, estimated to be approximately 10% of the face amount of such claims, or they can choose to receive membership interests in Cosmos Holdings, LLC, pro-rata, in lieu of a cash distribution. The owners of the Debtor will receive no distribution under the Plan on account of their membership Interests. Class 2 General Unsecured Claims are estimated to total $2,500,000. Holders of Allowed Class 2 Claims will be paid in two installments. Distributions will be made pro-rata among holders of Class 2 Claims. Class 2 has an estimated percentage recovery of 10%. Class 3 Unsecured Lender Claims total $5,278,315. Unsecured Lender Claims consist of Claims for money loaned to the Debtor pursuant to a promissory note. On the Effective Date or as soon as reasonably practicable thereafter, holders of Allowed Class 3 Claims will receive a percentage of the Cosmos Membership Interests. Distributions of such interests shall be made Pro Rata among Class 3 Creditors from the 100% of such interests held by the Debtor. Class 4 consists of all holders of membership interests in the Debtor. The membership interests of all holders of membership interests in the Debtor will be deemed extinguished without further action by the Debtor upon the Effective Date. The Committee believes that confirmation of the Plan will result in a larger distribution to unsecured creditors than any alternative scenario. The Committee recommends that creditors vote to accept the Plan. The Debtor sought authority to sell substantially all of its assets to Juanita's Snacks, LLC. On Oct. 30, 2019, the Court held a hearing on the Debtor’s request for approval of the asset sale. The Committee initially opposed the sale, but then consented on the record at the Sale Hearing after Juanita's agreed to provide another $175,000 in the form of short-term promissory notes. On Nov. 8, 2019, the Court entered an Order approving the sale of substantially all the Debtor's assets to Juanita's and certain affiliates. The sale closed on or around Dec. 3, 2019. The Debtor ceased operating upon the closing of the sale. The only steps required after confirmation will be to distribute Cash and Cosmos Membership Interests. The Debtor already holds the Cosmos Membership Interests, plus $273,775 in cash. That cash will be used first to pay administrative costs of the estate and priority claims, and then the remainder will be distributed pro-rata to General Unsecured Creditors under the Plan. A full-text copy of the Disclosure Statement dated March 20, 2020, is available at https://tinyurl.com/uj3wymj from PacerMonitor at no charge. Counsel for Debtor: Justin D. Leonard Direct: 971.634.0192 E-mail: jleonard@LLG-LLC.com Timothy A. Solomon Direct: 971.634.0194 E-mail: tsolomon@LLG-LLC.com Holly C. Hayman Direct: 971.634.0193 E-mail: hhayman@LLG-LLC.com LEONARD LAW GROUP LLC 1 SW Columbia, Ste. 1010 Portland, Oregon 97204 Fax: 971.634.0250 About 4 Him Food Group 4 Him Food Group, LLC, d/b/a Cosmos Creations -- http://www.cosmoscreations.com/-- is a snack food company specializing in manufacturing, marketing, and distribution of puffed corn. 4 Him Food Group manufactures premium natural snack foods -- including non-GMO hull-and-kernel-free puffed corn -- from state of the art manufacturing facilities in the heart of Oregon's Willamette Valley. 4 Him Food Group sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Ore. Case No. 19-62049) on July 2, 2019. The petition was signed by John Strasheim, president. At the time of the filing, the Debtor disclosed assets in the amount of $15,043,017 and liabilities in the amount of $18,755,626. Judge Thomas M. Renn is assigned to the case. Timothy A. Solomon, Esq., at Leonard Law Group LLC, is the Debtor's counsel. Gregory Garvin, acting U.S. trustee for Region 18, on Aug. 6, 2019, appointed five creditors to serve on the official committee of unsecured creditors in the Chapter 11 case. 402-420 METROPOLITAN: Case Summary & 19 Unsecured Creditors ----------------------------------------------------------- Debtor: 402-420 Metropolitan Ave LLC 1274 49th St Ste 443 Brooklyn, NY 11219-3011 Business Description: 402-420 Metropolitan Ave LLC is engaged in activities related to real estate. Chapter 11 Petition Date: April 1, 2020 Court: United States Bankruptcy Court Eastern District of New York Case No.: 20-41810 Debtor's Counsel: Kevin J. Nash, Esq. GOLDBERG WEPRIN FINKEL GOLDSTEIN LLP 1501 Broadway 22nd Floor New York, NY 10036 Tel: (212) 221-5700 E-mail: knash@gwfglaw.com Total Assets: $28,906,850 Total Liabilities: $29,110,233 The petition was signed by David Goldwasser, GC Realty Advisors, non-member manager and CRO. A copy of the petition is available for free at PacerMonitor.com at: https://is.gd/F9cYk8 List of Debtor's 19 Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ 1. 1270 44th Holdings LLC Loan $1,040,000 1274 49th St Brooklyn, NY 11219-3011 2. 382 Eight LLC Contract Price $4,756,850 24 Crane Neck Rd Setauket, NY 11733-1630 3. 402 Metropolitan Ave LLC Contract Price $19,350,000 Attn: Michael Mattone 134-01 29th Ave College Point, NY 11356 4. AkRF Services $17,390 440 Park Ave S Fl 7 New York, NY 10016-8012 5. Greenberg Traurig LLP Legal Services $1,112 1717 Arch St Ste 400 Philadelphia, PA 19103-2713 6. JM Zoning Services $69,200 225 Broadway Ste 1300 New York, NY 10007-3772 7. Kutnicki Berstein Services $490,839 Architects 277 Broadway Fl 17 New York, NY 10007-2074 8. Landstone Capital Group Services $227,500 4502 17th Ave Brooklyn, NY 11204-1110 9. Law Offices of Services $100,000 David J. Feit, Esq., PLLC 22 Cortlandt St Rm 803 New York, NY 10007-3154 10. Madison Title Agency Title Fees $705,954 1125 Ocean Ave Lakewood, NJ and Closing Costs 08701-4577 11. New York Engineers Services $87,120 135 W 41st St Fl 5 New York, NY 10036-7320 12. Nooklyn.com LLC Services $2,500 28 Scott Ave Apt 106 Brooklyn, NY 11237-2478 13. Pillori Associates, P.A. Services $10,580 71 State Route 35 Laurence Harbor, NJ 08879-2893 14. Rothkrug-Rothkrug & Spector, LLP Services $20,000 55 Watermill Ln Ste 200 Great Neck, NY 11021-4206 15. Roux Environmental & Engineering Services $1,187 209 Shafter St Islandia, NY 11749-5074 16. Swive Interiors Services $30,000 703 Myrtle Ave Brooklyn, NY 11205-390 17. Triplet Acquisitions Services $500,000 120 Wooster St New York, NY 10012-5200 18. WSP USA Services $100,000 1 Penn Plz Fl 2 New York, NY 10119-0299 19. Yoel Hershkowitz Services $1,600,000 80 Middleton St Brooklyn, NY 11206-2598 ACE MOTOR ACCEPTANCE: April 21 Plan Confirmation Hearing Set ------------------------------------------------------------ On March 16, 2020, Richard S. Wright on behalf The Russell Edward Algood Revocable Trust Dated May 15, 2013, the Janet G. Algood Living Trust, the John G. Algood Living Trust, and the Malvin L. Algood Living Trust filed a Disclosure Statement and a Plan for Debtor Ace Motor Acceptance Corporation. On March 17, 2020, Judge J. Craig Whitley approved the Disclosure Statement and established the following dates and deadlines: * April 14, 2020, is fixed as the last day for filing written acceptances or rejections of the Plan. * April 21, 2020, at 9:30 a.m. is fixed for the hearing on confirmation of the plan at Charles R. Jonas Federal Building, 401 West Trade Street, Courtroom 1−4, Charlotte, NC 28202. * April 14, 2020, is fixed as the last day for filing and serving written objections to confirmation of the plan. A full-text copy of the order dated March 17, 2020, is available at https://tinyurl.com/v63q4ea from PacerMonitor at no charge. About Ace Motor Acceptance Corp Ace Motor Acceptance Corporation, founded in 1998 -- https://www.acemotoracceptance.com/ -- is a North Carolina corporation that provides automobile loans. Formerly known as Ace Financial Services Inc., AMAC focused on a point of sale special finance program. In 2010 the Company added a program offering financing to Buy Here Pay Here (BHPH) dealers. In 2011, the Company developed and trademarked its BHPH in a Box program. BHPH in a Box provides a wide array of benefits to BHPH dealers including capital to fund receivables and floorplan lines to fund inventory. Additional benefits include training, insurance tracking and a reports package to assist dealers in many aspects of running a BHPH dealership. Ace Motor Acceptance, based in Matthews, NC, filed a Chapter 11 petition (Bankr. W.D.N.C. Case No. 18-30426) on March 15, 2018. In the petition signed by CEO Russell E. Algood, the Debtor was estimated to have $10 million to $50 million in both assets and liabilities. The Hon. Laura T. Beyer oversees the case. James H. Henderson, Esq., at The Henderson Law Firm PLLC, serves as bankruptcy counsel to the Debtor. An official committee of unsecured creditors was appointed in the Debtor's case on May 10, 2018. The Committee tapped Grier Furr & Crisp, PA, as its legal counsel. ACI WORLDWIDE: Moody's Affirms CFR at Ba3, Outlook Stable --------------------------------------------------------- Moody's Investors Service affirmed ACI Worldwide, Inc.'s Ba3 corporate family rating and Ba3-PD Probability of Default Rating. Moody's also affirmed ACI's B2 senior unsecured rating and maintained the SGL-2 speculative grade liquidity rating. The outlook remains stable. Affirmations: Issuer: ACI Worldwide, Inc. Probability of Default Rating, Affirmed Ba3-PD Corporate Family Rating, Affirmed Ba3 Senior Unsecured Regular Bond/Debenture, Affirmed B2 (LGD5) Outlook Actions: Issuer: ACI Worldwide, Inc. Outlook, Remains Stable RATINGS RATIONALE ACI's ratings reflect the company's stable revenue stream, driven by long-term software licensing contracts with renewal rates exceeding 95%, recurring subscriptions and a large backlog, which accounts for over 75% of annual revenue. ACI has a strong market position and long-standing legacy relationships in the payments software industry. Predictable revenue and profitability, combined with modest capital expenditure requirements, result in stable free cash flow generation. A deteriorating macroeconomic environment will slow down the pace of deleveraging over the next twelve months. The 2019 debt-financed acquisition of Speedpay increased debt/EBITDA above 4.5x, resulting in very high levels for the current rating category. However, ACI intends to use free cash flow to reduce debt and bring leverage under 4.0x (Moody's adjusted). Margins will continue to expand as ACI leverages its scalable on-demand platform over the incremental Speedpay revenue base. Moody's expects ACI's financial strategy, a key governance consideration under its ESG framework, will result in leverage trending down toward 4.0x over the next 12 months through a combination of debt repayment and margin expansion, albeit at a slower pace. Intense competition, particularly in the Bill Pay segment, and consolidation in the software and services payments industry are credit negative, partially offset by favorable industry trends as the transition from cash and checks to digital payments continues. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Social distancing measures that have been enacted globally due to the coronavirus outbreak could reduce merchant transactions, particularly for payments in the retail, hospitality and travel segments. Lower transaction volumes and a shrinking global economy will diminish revenue growth for ACI. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. A recessionary macroeconomic environment will pressure organic revenue growth below historical low single-digit levels over the next twelve months. However, the stable outlook reflects the expectation that leverage will continue to trend down toward 4.0x, albeit at a slower pace than initially anticipated at the time of the Speedpay transaction, as a result of debt repayment and margin expansion. FCF/debt will increase toward historical levels above 10%, as one-time transaction costs linked to the Speedpay acquisition diminish. The ratings for ACI's debt instruments incorporate both the overall probability of default of ACI, reflected in the Ba3-PD probability of default rating, and loss given default assessment of the individual debt instruments. The senior unsecured notes due 2026 are rated B2, two notches below the Ba3 corporate family rating, due to their subordinated position in the capital structure compared to the $1.0 billion of senior secured debt (unrated) due April 2024. ACI's liquidity is good, as reflected in the SGL-2 speculative grade liquidity rating. ACI had a cash & equivalents balance of $121 million as of December 2019 and $261 million of availability on its $500 million revolver due 2024. Moody's anticipates free cash flow above $125 million over the next twelve months, resulting in more than sufficient internal liquidity sources to fund its operating needs. The SGL-2 rating also incorporates its expectation that ACI will maintain a cushion of at least 20% on its covenant metrics. The principal methodology used in these ratings was Software Industry published in August 2018. Factors that would lead to an upgrade or downgrade of the ratings: Ratings could be lowered if credit metrics deteriorate, such that free cash flow to debt is expected to be sustained under 10% or debt to EBITDA to remain above 4.0x (all credit metrics Moody's adjusted). Ratings will be pressured if ACI's revenue growth falls behind expectations or if Moody's believes that the company's EBITDA margin (Moody's adjusted) will be sustained below 20%, both of which would indicate that ACI is losing market share and pricing power. Shareholder-friendly policies prior to a material debt and leverage reduction could also result in a downgrade. A ratings upgrade is unlikely over the next 12 months given the heightened leverage from the Speedpay acquisition and a deteriorating macroeconomic environment, which will reduce growth materially and slow down the anticipated debt reduction. In the long term, the rating could be upgraded if ACI's strategy is producing an improved market position, as evidenced by consistent organic revenue growth and an expansion of its EBITDA margin (Moody's adjusted) toward 30%. An upgrade would also require a commitment to balancing the interests of shareholders and creditors by reducing leverage through both EBITDA growth and absolute debt reduction, such that debt to EBITDA is sustained below 3.0x and free cash flow to debt is sustained above 20% (all credit metrics Moody's adjusted). ACI develops and implements a broad line of software to financial institutions, merchants, payment processors and corporates to facilitate the processing of electronic transactions such as ACH, wire transfers, credit/debit card transactions and other digital payments. ACI generated $1.4 billion in revenue in 2019, pro forma with Speedpay. ALKU LLC: Moody's Cuts CFR & Senior Secured Rating to B3 -------------------------------------------------------- Moody's Investors Service downgraded ALKU, LLC's ratings, including its corporate family rating to B3 from B2 and its probability of default rating to B3-PD from B2-PD. At the same time, Moody's downgraded the instrument ratings on ALKU's senior secured credit facility to B3 from B2. The outlook is stable. "The downgrade of ALKU's ratings is driven by the company's exposure to the onset of the coronavirus pandemic that Moody's expects will keep leverage at its previously indicated downgrade indicator 5 times during the next 12 months," said Andrew MacDonald, Moody's analyst. "The stable outlook reflects that while previously anticipated growth may not materialize, the company's credit quality and liquidity should be somewhat insulated from the impact of the coronavirus given the company's concentration in healthcare IT and life sciences." The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The staffing industry sector is anticipated to be one of the sectors most significantly affected given the tendency of employers to quickly cut temporary workers and reduce hiring when economic conditions deteriorate. Initial employment data stemming from the COVID-19 outbreak is extremely negative as the increase of initial jobless claims in the US rose to a record high 3.3 million claims for the week ending March 21, 2020 and is significantly higher than the previous record of 695,000 in October 1982. More specifically, the weaknesses in ALKU's credit profile, including its relative small size and enterprise client customer concentration have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on ALKU of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. RATINGS RATIONALE ALKU's B3 CFR reflects the company's small scale, moderately high Moody's adjusted debt-to-EBITDA leverage of 4.8x (as of 30 December 2019) before considering potential impact from the coronavirus outbreak that Moody's expects will drive leverage above 5x by the end of 2020. The company's small size and high customer concentration relative to other rated staffing firms adds risk that credit metrics would deteriorate quickly in the event the company loses a large customer. While ALKU's also has a service offering that focuses on a niche high skilled professions (life sciences, healthcare IT, technology, and government roles), Moody's believes that this niche is somewhat protected from the coronavirus impact given the ability to serve clients remotely and expected continued demand for services. Nonetheless, demand is expected to decline during the next several quarters as its customers will likely pause or postpone new projects. The company's liquidity is viewed as adequate with approximately $33 million in total liquidity from a combination of access to a partially drawn $30 million revolving credit facility due 2024 and cash as of March 2020. Moody's expects the company will also look to rationalize fixed charges to offset any revenue declines and anticipate working capital should initially be a source of cash in a downturn. Free cash flow is expected to be volatile during the next 12 to 18 months depending on the severity of the impact of coronavirus, however the company's existing cash balance, revolver access, and a lack of near-term maturities provides key support for the rating. With FFL Partners acquiring a controlling stake, Moody's believes the company's financial policy will be consistent with private equity ownership and views governance risk as high, including event risk from debt-financed acquisitions and dividends, which could increase leverage and vulnerability to cyclical downturns. The stable outlook reflects Moody's expectation of adequate liquidity supported by free cash flow and revolver availability despite any weakening of credit metrics given the company's exposure to staffing demand. Factors that would lead to an upgrade or downgrade of the ratings: Although not likely in the near term, the ratings could be upgraded if ALKU generates revenue and EBITDA growth such that debt-to-EBITDA is sustained below 5x and free cash flow-to-debt approaches 5%. Conversely, ratings could be downgraded if Moody's expects credit quality and liquidity to deteriorate such that debt-to-EBITDA is expected to increase above 7x and free cash flow-to-debt less than 1%. Downgrades: Issuer: ALKU, LLC Probability of Default Rating, Downgraded to B3-PD from B2-PD Corporate Family Rating, Downgraded to B3 from B2 Senior Secured Bank Credit Facility, Downgraded to B3 (LGD3) from B2 (LGD3) Outlook Actions: Issuer: ALKU, LLC Outlook, Remains Stable The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Headquartered in Andover, Massachusetts, ALKU is a specialized provider of temporary and contractual consultants in the technology, healthcare IT, life sciences and government sectors (top secret clearance-related roles). Following the close of the proposed transaction, the FFL Partners will own a controlling stake in ALKU. The company generated less than $500 million in revenue in last twelve months ended 31 December 2019. ALLIANCE RESOURCE: S&P Downgrades ICR to 'BB-'; Outlook Stable -------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on U.S.–based coal producer Alliance Resource Partners L.P. (Alliance) to 'BB-' from 'BB+'. S&P is also lowering the issue-level rating on Alliance's senior unsecured debt to 'BB-' from 'BB'. The coal sector has been facing difficult operating conditions for quite some time, with multiple waves of headwinds eroding business prospects. The shale revolution that took off in 2005 has evolved into abundant supplies of natural gas, which electricity generation plants can burn more cheaply and cleanly than most thermal coals. This led to a spate of bankruptcies into 2016 and underscored S&P's view that the domestic thermal coal industry was in secular decline. Coal fired plants were being retired at an increasing pace, and it was already generally accepted that building a new plant would be uneconomical. Nevertheless, export markets and metallurgical coal served as lifelines as the sector posted a modest recovery following the bankruptcy restructurings. Met coal prices fell 30% in the second half of 2019, thermal export markets collapsed causing a significant coal oversupply domestically, and a surge of Environmental, Social and Governance (ESG) activism all dimmed coal's prospects. Recently, capital markets have become increasingly difficult for coal companies to access, and financial products have become more expensive to service in general. With this as the backdrop, gas prices have fallen more than 20% since the beginning of the year, and the coronavirus pandemic will certainly slow down the global economy and suppress coal demand. The stable outlook reflects a scenario where the most acutely detrimental operating conditions will moderate in the second half of the year, resulting in year-end leverage in the 2x – 3x range. Alternatively, even if current conditions persist somewhat longer than expected, leverage would still remain below 4x with EBITDA margins above 25%. S&P expects the deteriorating measures to be driven chiefly by continued weak demand for coal, particularly from the Illinois basin as well as low oil and gas prices that will weigh on the minerals segment. "We could lower our rating on Alliance if leverage rises above 4x, and if EBITDA margins fall below 25%, particularly if free operating cash flow (operating cash flow less capital spending) is negative. This would be associated with adjusted EBITDA below $200 million, which could happen if production volumes decrease due to extended mandated mining closures because of coronavirus-related concerns," S&P said. "We would consider raising the rating after we have more clarity on near term conditions. This would most likely be after coronavirus-related restrictions are lifted, and seaborne coal markets rebalance. At that time, we would look to Alliance's ability to maintain leverage below 3x along with an adequate level of liquidity and positive FOCF," the rating agency said. AMERICAN TRAILER: Moody's Cuts Senior Secured Notes to Caa1 ----------------------------------------------------------- Moody's Investors Service downgraded the senior secured notes rating of American Trailer World Corp. to Caa1 from B3 and placed of all the ratings on ATW under review for downgrade, including the B3 Corporate Family Rating and B3-PD Probability of Default Rating. The downgrade of the senior secured notes to Caa1, one notch below the CFR, reflects its preponderance and effective subordination in the capital structure behind the increased ABL revolver, to $225 million from $175 million. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The company is exposed to sectors that will be significantly affected by the shock, given their sensitivity to consumer demand and sentiment, general economic and industrial activity. More specifically, ATW's credit profile, including its exposure to the highly volatile trailer industry where demand is already moderating, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. ATW also remains vulnerable to the outbreak continuing to spread, including the potential negative impact of supply chain disruptions on its material/input costs. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the expected impact on ATW of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. The ratings, including the B3 CFR, reflect the company's exposure to the severe cyclicality of the trailer market and consumer and industrial end markets that are sensitive to macroeconomic conditions. Moody's believes the onset of the coronavirus pandemic will exacerbate the decline in new trailer shipments and economic growth into 2021 and will constrain the company's metrics, where debt/EBITDA is likely to weaken well above 5x (Moody's adjusted) in 2020. Event risk is increased given private equity ownership, including potential debt-funded shareholder distributions. The credit profile benefits from having no near term debt maturities. In its review, Moody's will consider (i) the company's liquidity profile, (ii) evolving market conditions, including the magnitude of the impact of the coronavirus outbreak on trailer demand, (iii) the company's ability to adapt its costs and investments to potentially rapid declines in demand and sales volumes, and (iv) the potential to restore credit metrics when economic activity recovers. Moody's took the following actions on American Trailer World Corp.: Corporate Family Rating, Placed Under Review for Downgrade, currently B3 Probability of Default Rating, Placed Under Review for Downgrade, currently B3-PD Senior Secured Notes, Downgraded to Caa1 (LGD4) from B3 (LGD4), Placed Under Review for further Downgrade Outlook, changed to Ratings Under Review from Stable Factors that could lead to an upgrade or downgrade of the ratings: There will be no upward ratings pressure until trailer demand improves along with business conditions and general economic activity. Over time, the ratings could be upgraded if Moody's expects the company to have sustainably stronger metrics, including free cash flow to debt in the high single digit range and amounts applied to debt reduction, and debt/EBITDA sustained below 4x. The ratings could be downgraded with deteriorating operating performance, including expectations of a material decline in revenue or margins, sustained negative free cash flow or increased reliance on the ABL revolver, EBITA/interest below 1.5x or debt/EBITDA expected to approach or exceed 6x on a sustained basis. Downward ratings momentum could also develop if the company engages in shareholder-friendly actions or debt-funded acquisitions that increase leverage. The principal methodology used in these ratings was Manufacturing Methodology published in March 2020. American Trailer World Corp., based in Richardson, Texas, is a manufacturer of professional grade utility and spare parts in North America. The company acquired America Trailer Works, Inc. (ATWI) in August 2016, a manufacturer of primarily consumer grade utility and cargo trailers. Revenues were approximately $1.26 billion for the last twelve months period ended September 30, 2019. The company is majority-owned by funds affiliated with Bain Capital. ANTERO RESOURCES: S&P Downgrades ICR to 'B-'; Outlook Negative -------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on U.S.-based exploration and production company Antero Resources Corp. to 'B-' from 'B+'. S&P also lowered its issue-level ratings on the company's unsecured debt to 'B' from 'BB-' (recovery rating: '2'). Antero faces a significant challenge in addressing its upcoming debt maturities. The company has $953 million due in November 2021, $923 million due in December 2022, and $750 million due in June 2023, and S&P views unsecured debt markets as unavailable based on the current trading prices of its securities. Antero plans to use proceeds from asset sales to address a portion of these obligations. In S&P's estimation, the timing and amounts of these sales is uncertain given market conditions. Antero is investing to increase production to meet unused firm transportation (FT) commitments. "We view Antero Resources Corp.'s pipeline transportation access a competitive advantage under most market conditions, because it provides it with access to favorable domestic natural gas and international natural gas liquids (NGL) markets. However, the cost of unused capacity will be a drag on profitability until the volumes are filled. We forecast that Antero is outspending internally generated cash, excluding one-time items and midstream distributions, to increase production by 8%-10% per year in order to fully utilize its transportation commitments by 2022," S&P said. The negative outlook reflects the refinancing risk Antero faces as it confronts large debt maturities beginning in 2021. This risk is particularly acute given the depressed commodity price environment. "We could lower the rating if Antero does not execute its plans this year to address upcoming debt maturities, including through proposed asset sales. We could also lower the rating if Antero's liquidity becomes constrained or credit measures weaken to the point that we view the capital structure as unsustainable." Such a scenario could occur if commodity prices, in particular prices for NGLs, weaken further, or if the gap between capital spending and internal cash flow widens," S&P said. S&P could revise the outlook to stable if Antero addresses its upcoming debt maturities. This would most likely occur if the company executes its asset sale plans. Improving credit measures, such as FFO to debt above 20%, would also support a stable outlook. This could occur if commodity prices, in particular prices for NGLs, strengthen, or if gains in capital efficiency narrow the gap between spending and internal cash flow. ARCONIC CORP: Fitch Assigns BB+ LT IDR & Alters Outlook to Negative ------------------------------------------------------------------- Fitch Ratings has assigned Arconic Corp. a final long-term Issuer Default Rating of 'BB+' from previous expected IDR of 'BB+ (EXP)'. Fitch has also assigned final long-term ratings to the senior 1st lien secured revolver and term loan B at 'BBB-'/RR1 and senior 2nd lien notes at 'BB+'/RR4, from previous expected ratings of 'BBB- (EXP)'/RR1 and 'BB+ (EXP)'/RR4, respectively. The Rating Outlook is revised to Negative from Stable. The revised outlook to negative reflects the increased risk that the coronavirus pandemic could have on the company's credit profile, whether through supply chain disruption, facility closures, or end-market weakness. Fitch believes the coronavirus pandemic will negatively affect 2020 and 2021 revenue, profitability and cash generation. However, Fitch expects the company will return toward previously expected trends by 2022. Although ARNC has not experienced a meaningful operational disruption or slowdown in production as of the end of March 2020, the risk of supply chain disruption exists and some of the company's customers, including Boeing, are also experiencing difficulties. The magnitude of a potential impact is unknown and will largely depend on the duration of the disruption to the aviation industry, whether ARNC has any facility closures that persist for an extended period of time, and the return to service of Boeing's 737MAX. Fitch believes the company's limited profitability could be exacerbated in the case of a prolonged downturn, although its financial structure is a mitigant. ARNC's ratings are supported by the company's strong financial structure, which is generally in line with companies rated at investment-grade levels. The company's end-markets are also relatively diversified and comprised of industries that are shifting toward lighter weight materials, which ARNC specializes in. Although the company is exposed to commodity price volatility, costs are generally passed onto to customers. Fitch believes the company requires a strong financial structure to offset its limited profitability and moderate exposure to broad economic cycles, which constrain the company's rating. The company will also be required to make material pension contributions going forward, straining its financial flexibility. The current market environment with lower interest rates and asset values could also require the company to make additional pension contributions over time. ARNC will also assume the potential liability that could stem from the Grenfell Towers tragedy in 2017, which will remain an overhang for the foreseeable future despite Fitch's expectation that insurance coverage may offset potential liabilities. Finally, there is a risk that the new management team could implement new strategies that deviate from the credit-positive financial and operational policies of the previous team, which could change Fitch's assessment of the company, although Fitch views this as unlikely. KEY RATING DRIVERS Strong Financial Structure: ARNC's pro forma leverage is low and its financial structure is strong for the ratings. Fitch forecasts 2021 gross debt/EBITDA to remain below 1.5x and 2021 FFO leverage at or below 2.5x, which are more commensurate with 'BBB' or 'A' category issuers. Fitch believes the company must maintain lower leverage than similarly rated peers due to the high degree of cyclicality, profitability consistent with mid-'BB' category rated issuers and substantial required pension contributions. Limited Profitability: Fitch views ARNC's profitability as somewhat weaker than similarly rated companies. Fitch forecasts the company will generate low double-digit EBITDA margins, mid-single-digit FFO margins and neutral-to-positive FCF margins over the rating horizon. Fitch believes the company's anticipated top-line growth and focus on operational efficiency will likely support management in maintaining or improving these thresholds over the long term. ARNC also has relatively low capital intensity, with capex representing less than 3% of revenue and minimal working capital requirements. Fitch believes these positive factors are somewhat offset by the entity's significant annual pension contributions, expected environmental payments, and potential sensitivity to end-market cyclicality. Pension Split: Arconic Inc.'s pension will be split between ARNC and Howmet (HMT; RemainCo) at the time of the transaction. Fitch estimates approximately 55% of the pension plan and 73% of the other post-employment benefit (OPEB) liability will shift to ARNC. As a result, the company's required cash contribution to the plans will likely be between $325 million and $375 million per year over the next few years. Fitch believes this required outflow is manageable but will continue to weigh on the company's ability to generate FFO over the long term and could impede positive rating momentum into investment grade territory. Increased pension contribution requirements could also be possible depending on the fluctuation in interest rate and asset values over the near-to-intermediate term. Adequate Financial Flexibility: Fitch believes ARNC has adequate financial flexibility. The company currently plans to maintain in excess of $1.5 billion of liquidity, comprised of a minimum expected cash balance of $500 million and a $1.0 billion revolver. The company currently has $1.3 billion of liquidity according to its 10k filing. Fitch projects that the company will generate neutral-to-positive FCF over the next few years, modestly improving annually as pension contributions decline and margins recover. This flexibility should be ample enough to support the company's cash outflows, including annual capex, pension costs, working capital fluctuations and a modest dividend. Fitch believes this flexibility can support the company over the intermediate term as the coronavirus pandemic plays out, particularly if management can efficiently curtail operating costs. However, flexibility could become limited if the coronavirus pandemic further disrupts operations or if Boeing's 737MAX does not return to service in 2H20. Cyclical, But Diversified End-Markets: ARNC's end markets are highly cyclical, as its customers operate in the commercial aerospace, ground transportation, packaging, diversified industrial, and building and construction industries. The exposure to economic cycles and demand fluctuations within these industries could result in significant top-line volatility, as seen in the current environment. Some of this risk is partially mitigated by the company's diversified mix of end-markets, long production lead-time, long-term contracts and relationships and innovative offerings. However, prolonged market volatility and uncertainty could lead to negative rating momentum. Strong Market Position: ARNC is the leading global producer of rolled aluminum sheet. The company is the number one sheet producer for the global aerospace industry, and a top two producer for industrial and packaging, the North American building and construction, and auto and transportation markets. No individual end-market makes up greater than 34% of sales. Fitch believes the company's market position is somewhat defensible due to the company's scale and proven ability to innovate with lightweight materials without substantially sacrificing strength. Commodity Costs Pass-through: ARNC has minimal commodity exposure. Aluminum and other materials specifically used in many of the company's engineered products are typically sold directly to customers and distributors, reducing the impact. The company estimates that 90% of aluminum exposure is passed through directly to its customers. Where costs cannot be passed through to customers, they are generally hedged. Grenfell Liability: Fitch believes the liability related to the Grenfell Towers fire in 2017 was spun-off within ARNC along with Reynobond PE and the Building and Construction Services unit as part of the transaction. However, ARNC will maintain the insurance rights of the parent company. Reynobond supplied cladding panels that were used in renovating Grenfell Tower in North Kensington, West London, in 2016. The building suffered a deadly fire on June 14, 2017. At least 80 people have been confirmed dead as a result of the fire. Legal proceedings regarding the incident are in the early stages. A first phase, fact-identification report was completed in November 2019. The second phase, a more detailed report, likely won't be completed until early-2021. Fitch believes it is likely that potential litigation could last beyond the current rating horizon, and an out of court settlement is possible. Since the tragedy, the U.K. government has funded a GBP200 million program for the removal of non-compliant cladding from housing structures in Britain. The onus to remove the cladding is on the building owners, although there is a possibility that the government could petition suppliers and contractors to contribute to the fund. New CEO Appointment: Timothy Myers was appointed as CEO of Arconic Corp. as part of the spin-off transaction. Mr. Myers previously held the position of executive vice president and group president for Arconic's aluminum rolled products, transportation and construction products businesses. Fitch views the appointment as neutral-to-positive, as it likely reduces the risk of operational disruption related to a leadership change. Generally, Fitch assumes the company's financial strategy will remain unchanged after the split and transition to the new CEO. Fitch believes the Arconic Inc. management team and board will have stressed the importance of maintaining a consistent financial and operational strategy post-transaction in their selection process for a new management team. Although the risk of operational disruption is reduced, Fitch believes execution risk will be modest over the 12 months to 18 months following the split, while the two stand-alone companies acclimates to acting as separate entities. It is also possible that a new management team could materially deviate from current strategy, although Fitch's base case assumes continuity. DERIVATION SUMMARY Arconic Rolled Products Corp. compares swell to Harsco Corporation (BB/Stable) and Dana Incorporated (BB+/Stable). In general the company has weaker profitability than both peers, but a moderately stronger capital structure. Fitch considers ARNC's end markets to be more diversified than both Dana and Harsco and expects the company's cash flow to gradually improve following the initial adjustment to operating as a standalone entity. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Coronavirus impact on global aviation fleet grounding, auto demand and diversified manufacturing, as well as the delay in 737MAX return to service leads to a moderate revenue decline and limited margin expansion in 2020; gradual rebound in 2021 before a return to high-single digit to low-double digit annual growth between 2022 and 2023; -- EBIT margins trend toward 8% over next few years; EBITDA margins in the low double digits; -- No material operational disruptions related to spin off; -- Capex between 2% and 3% of revenue per year from 2019 to 2022; -- Annual dividend up to $100 million per year; -- Pension contributions plus OPEB payments between $325 million and $375 million per year between 2020 and 2023, though Fitch recognizes there is some uncertainty and downside of increased pension contributions related to lower interest rates and asset values in the near-to-intermediate term; -- ARNC pays $700 million dividend to HMT; -- Debt issuance of $1.2 billion related to transaction; -- Aggregate voluntary debt paydown in excess of $200 million between 2021 and 2022; -- The new management team generally follows the financial and operational strategy that current management team has laid out. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - FFO fixed charge coverage ratio sustained above 5x; - FFO leverage sustained below 2x; - Gross leverage (total debt-to-EBITDA) sustained below 1x; - EBIT margins sustained above 8%; - Company publicly commits to obtaining and maintaining an investment grade credit profile; Developments That May, Individually or Collectively, Lead to Negative Rating Action - FFO fixed charge coverage sustained below 4x after 12 to 18 months following the transaction; - FFO leverage is sustained above 3x after 12 to 18 months following the transaction; - Gross leverage (total debt-to-EBITDAR) sustained above 1.8x: - EBIT margins sustained below 7% after 12 to 18 months following the transaction; - Contingent legal liabilities, pension contributions, or environmental liabilities result in significant cash flow impact. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Fitch expects the company's liquidity to be adequate over the rating horizon. As of Dec. 31, 2019, Fitch considers ARNC's liquidity to have been ample at around $1.3 billion, comprised of $760 million in availability under its $1.0 billion revolver and $500 million in cash. Fitch anticipates ARNC will maintain liquidity between $1.3 billion and $1.6 billion on average over the next several years, comprised of greater than $450 million of cash and new senior first lien secured $1.0 billion revolver, which could be drawn upon during the year to cover short-term working capital fluctuations but would likely be subsequently paid down. Excess cash will likely be deployed towards repayment of the company's new term loan and a modest dividend. The company could also deploy cash towards share repurchases after paying down debt over time. ARPC's capital structure consists of a $600 million Secured Term Loan B, maturing in 2027, bearing an interest rate of LIBOR plus 275 bps, and $600 million of 2nd Lien Secured Notes maturing in 2028, bearing a fixed interest rate of 6.125%. ARR INVESTMENTS: April 16 Plan & Disclosure Hearing Set ------------------------------------------------------- ARR Investments, Inc. and its debtor affiliates filed with the U.S. Bankruptcy Court for the Middle District of Florida, Orlando Division, a Disclosure Statement and a Plan of Reorganization. On March 19, 2020, Judge Karen S. Jennemann conditionally approved the Disclosure Statement and established the following dates and deadlines: * April 16, 2020, at 2:00 p.m. in Courtroom 6A, 6th Floor, George C. Young Courthouse, 400 West Washington Street, Orlando, FL 32801 is the hearing to consider and rule on the disclosure statement and to conduct a confirmation hearing. * Creditors and other parties-in-interest will file with the clerk their written acceptances or rejections of the plan (ballots) no later than seven days before the date of the Confirmation Hearing. * Any party desiring to object to the disclosure statement or to confirmation shall file its objection no later than seven days before the date of the Confirmation Hearing. * In accordance with Local Bankruptcy Rule 3018−1, the debtor shall file a ballot tabulation no later than four days before the date of the Confirmation Hearing. A full-text copy of the order dated March 19, 2020, is available at https://tinyurl.com/up2ovnn from PacerMonitor at no charge. About ARR Investments ARR Investments, Inc., and its subsidiaries -- http://www.arr-learningcenters.com/-- offer learning centers for infants, toddlers, preschoolers and Voluntary Pre-Kindergarten in Orlando, Florida. The Learning Centers provide computer labs; dance, yoga, music classes; aerobics; foreign language instruction; before/after school transportation; certified lifeguard and safety instructor for swim lessons and play; and mini-camp breaks and summer camp. ARR Investments and three of its subsidiaries filed voluntary petitions seeking relief under Chapter 11 of the Bankruptcy Code (Bankr. M.D. Fla. Lead Case No. 19-01494) on March 8, 2019. The petitions were signed by Alejandrino Rodriguez, president. At the time of filing, the Debtors were estimated to have under $10 million in both assets and liabilities. Jimmy D. Parrish, Esq., at Baker & Hostetler LLP, serves as the Debtors' counsel. ARRAY CANADA: S&P Places 'CCC+' ICR on CreditWatch Negative ----------------------------------------------------------- S&P Global Ratings placed all of its ratings on Array Canada Inc., including its 'CCC+' issuer credit rating on the company, on CreditWatch with negative implications. "We anticipate a widespread shutdown and retail closures could severely pressure Array's revenues and EBITDA for fiscal 2020. As the efforts to contain COVID-19 result in retail and specialty, including beauty, store closures and changes to shopping habits globally, we expect Array to face pressure on its operating performance in fiscal 2020. Specifically, we expect Array's customers who are mass and specialty retailers as well as beauty brand partners will likely curtail expenditures on renovations and refreshes. Furthermore, as retailers strive to preserve liquidity, they could also lower or defer their discretionary capital investment in new stores for fiscal 2020. A continued economic recession could also result in the loss of customers and sharp revenue declines for Array. We forecast Array's fiscal 2020 revenues to decline 12%-15% compared with previous forecasts. We also expect EBITDA and EBITDA margins on an S&P Global Ratings-adjusted basis to further weaken, and credit measures to increase to about 10x for fiscal 2020. Considering such potentially high leverage, we view Array's capital structure as unsustainable in the short term absent favorable changes in business conditions," S&P said. S&P acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak between June and August, and S&P is using this assumption in assessing the economic and credit implications. S&P believes measures to contain COVID-19 have pushed the global economy into recession and will cause a surge of defaults among nonfinancial corporate borrowers. The CreditWatch placement reflects uncertainty about the extent of the negative impact of COVID-19 on the company's EBITDA and cash flows. S&P could lower its ratings on Array if it envisions a specific default scenario over the next 12 months, including a shortfall in near-term liquidity. ASP UNIFRAX: Moody's Lowers CFR to Caa1 & Alters Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service downgraded ASP Unifrax Holdings, Inc.'s Corporate Family Rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD, ratings of $125 million senior secured first lien revolving credit facility and $1.05 billion senior secured first lien term loans including both the US dollar and Euro tranches to Caa1 from B3. Moody's also downgraded the rating of the company's $250 million senior secured second lien term loan to Caa3 from Caa2. The outlook for the ratings is stable. The ratings downgrades reflects Moody's view that the rapid spread of the coronavirus across many regions and markets that the company operates in will have a material negative impact on its already weakened credit profile and prevent the company from deleveraging over the next 12-18 months. Downgrades: Issuer: ASP Unifrax Holdings, Inc. Corporate Family Rating, Downgraded to Caa1 from B3 Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Gtd Sr Secured 1st Lien Term Loan, Downgraded to Caa1 (LGD3) from B3 (LGD3) Gtd Sr Secured 2nd Lien Term Loan, Downgraded to Caa3 (LGD6) from Caa2 (LGD5) Gtd Sr Secured 1st Lien Revolving Credit Facility, Downgraded to Caa1 (LGD3) from B3 (LGD3) Outlook Actions: Issuer: ASP Unifrax Holdings, Inc. Outlook, Changed To Stable From Negative RATINGS RATIONALE Unifrax entered 2020 with a credit profile that was already weakened by high levereage exceeding 8x adjusted debt-to-EBITDA and significant interest expense following the leveraged buyout by Clearlake Capital Group in late 2018, and the debt-funded acquisition of Stellar Materials in June 2019. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. More specifically, the weakness in Unifrax's credit profile, as evidenced by the current high leverage and negative free cash flow as well as the company's material exposure to various regions and industries severely impacted by the coronavirus outbreak, and specifically the global automotive sector, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Unifrax of the breadth and severity of the shock, and the expected deterioration in credit quality it has triggered. Moody's has recently revised the global real GDP forecasts downward for 2020 due to the rising economic costs of the coronavirus shock, now expecting the global economy to contract by 0.5% in 2020, followed by a pickup to 3.2% in 2021. Unifrax benefits from specialty nature of the business, its broad customer and geographic diversity and ongoing growth initiatives designed to meet the rising product demand from end markets subject to stringent safety regulations and environmental protection standards. However, the current market environment is expected to lead to a notable decline in revenues in 2020 given the company's significant exposure to cyclical end-markets, particularly the automotive sector, and the company's substantial presence in China, Europe, United States and India, regions that have been so far affected the most by the outbreak with the lockdowns and other social distancing measures resulting in a severe curtailment of the economic activity. In the first two months of 2020, passenger car sales in China nearly halved and the new car registrations in Europe declined substantially, even before the severe restrictions were put in place in March by several European countries. Many of the North American automotive plants are shut down until March 31st at the earliest. Lower revenues are expected to adversely impact its profitability due to weaker demand, potential supply disruptions and lower fixed costs absorption as sales volumes decline and pricing pressures emerge. Moody's expects planned productivity improvements and aggressive cost-cutting measures Unifrax is currently undertaking to partially offset the expected decline in Moody's adjusted EBITDA, which Moody's estimates could fall by 16-19% y-o-y in 2020. Luyang's EBITDA is not included in Moody's adjusted EBITDA estimates. Moody's now expects Unifrax to be free cash flow negative in 2020 and for adjusted leverage to potentially exceed 10x in 2020 before declining to lower 9x by 2021, which is high for the previous rating category. The stable outlook reflects Moody's current expectations that fiscal and monetary policy measures being implemented by many countries will likely support the global economic recovery in 2021 and that Unifrax's will accelerate its cost reduction initiatives and will carefully manage its liquidity through the likely economic downturn. Unifrax overall faces moderate environmental, social and governance risks. However, governance risk is above average due to private equity ownership which extracts substantial managements fees from the company, the sponsor's aggressive financial policies and pursuit of acquisitive growth at the time of weakening macro environment and high growth capex spending, which are key drivers of the currently high financial leverage. Unifrax has a good liquidity profile supported by $29 million cash on hand as of September 30, 2019, with the undrawn $125 million revolving credit facility due in 2023 and its 28% equity stake in Luyang, publicly listed ceramic fiber producer in China, which provides an alternative source of liquidity for debt service if management chooses to do so. Moody's expects Unifrax to be free cash flow negative in 2020 and rely on the revolver to support its basic working capital needs. The revolver has a springing 1st lien leverage covenant of 7.5x at 35% utilization of revolver. Moody's expects the company to remain compliant with the covenant albeit with a more modest cushion than expected previously. The Caa1 ratings on the senior secured first lien revolving credit facility and term loans, are at the same level as the corporate family rating, as they represent the preponderance of total debt and are secured by a first priority lien on substantially all domestic assets and, in the instance of Euro-denominated borrowings, the assets of certain international subsidiaries in the U.K. and Germany. The $250 million second lien term loan is rated Caa3 given its effective subordination to the first lien credit facilities. The remaining international assets are not encumbered. Factors that would lead to an upgrade or downgrade of the ratings: The ratings upgrade is unlikely in the near-term but could be considered longer term if Moody's-adjusted debt/EBITDA declines below 7.5x and the company demonstrates the ability to generate positive free cash flow on a sustained basis. An upgrade would also require a commitment to more conservative financial policies from the sponsor and management. Moody's could downgrade the ratings if operating performance deteriorates, if adjusted leverage increases to and expected to remain above 9.5x or if the company undertakes a significant debt-financed acquisition or dividend recapitalization. Moody's could also downgrade the ratings if free cash flow remains negative and liquidity deteriorates. The principal methodology used in these ratings was Chemical Industry published in March 2019. Headquartered in Tonawanda, N.Y., ASP Unifrax Holdings, Inc. produces heat-resistant ceramic fiber products and specialty glass microfiber materials for a variety of industrial applications. The company has been a portfolio company of Clearlake Capital Group since late 2018. Unifrax generated revenues of approximately $538 million for the twelve months ended September 30, 2019. AT HOME HOLDING: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. ------------------------------------------------------------------ Moody's Investors Service downgraded At Home Holding III Inc.'s corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD and its senior secured first lien term loan to Caa2 from Caa1. The outlook was changed to negative from stable. "The downgrade reflects the need to close stores and negative effect on consumer demand caused by the wide spread outbreak of COVID-19 that will significantly impact leverage and coverage", said Moody's analyst Peggy Holloway. Given the severe shock to the US economy, consumer demand for home decor is expected to experience a slower rebound relative to other retail sectors given the discretionary nature of the purchase. The company has pro-actively drawn $55 million on its revolving credit facility; its term loan and revolver mature in June 2022. The negative outlook reflects uncertainty around the duration of unit closures, liquidity, and pace of rebound in consumer demand once the pandemic begins to subside. Downgrades: Issuer: At Home Holding III Inc. Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Corporate Family Rating, Downgraded to Caa1 from B3 Senior Secured Bank Credit Facility, Downgraded to Caa2 (LGD4) from Caa1 (LGD4) Outlook Actions: Issuer: At Home Holding III Inc. Outlook, Changed To Negative From Stable RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The Non-food retail sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in At Home's credit profile, including its exposure to store closures have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and At Home remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on At Home of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. At Home is constrained by its high lease-adjusted leverage, modest scale, and operations in the discretionary and increasingly competitive home decor segment. The company's credit profile is supported by At Home's moderate funded leverage and differentiated home decor "fast fashion" value proposition. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if the duration of the closures lingers, thereby squeezing liquidity or if the probability of default increases for any reason. Quantitatively, ratings could be downgraded if debt/EBITDA increase above 7.25x or EBIT/interest declines to .5x. Given the negative outlook as well as the expected severity of the impact of coronavirus on At Home's earnings, an upgrade over the near term in unlikely. However, ratings could be upgraded once the impact of coronavirus has abated and operating performance has improved such that debt/EBITDA is sustained below 6.5x and EBITA/interest expense approached 1.0x. AVON PRODUCTS: Moody's Places B1 CFR on Review for Downgrade ------------------------------------------------------------ Moody's Investors Service has placed on review for downgrade the B1 Corporate Family Rating and the B1-PD Probability of Default Rating of Avon Products, Inc. Concurrently, Moody's has placed on review for downgrade the B3 rating on the senior unsecured notes issued by Avon and the Ba1 rating of the senior secured notes issued by Avon's wholly owned subsidiaries Avon International Operations, Inc. and Avon International Capital PLC. The outlook on the ratings was changed to ratings under review from negative. "We have placed Avon's ratings on review for downgrade because of the current uncertainties related to the spread of the coronavirus and the impact that this could have on the company's business. Social distancing measures in many countries could negatively impact the company's direct selling business model, resulting in much lower sales and earnings in 2020," says Lorenzo Re, a Moody's Vice President - Senior Analyst and lead analyst for Avon. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The consumer products sector has been one of the sectors affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Avon's credit profile, including its exposure to multiple countries affected by social distancing measures have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Because of the social distancing measures, the company's ability to recruit sales force, as well as the ability of representatives to meet customers and collect orders will be impaired. Moreover, disruption in the production and distribution facilities could affect its ability to properly fulfill orders. While Moody's continues to assess Avon's credit profile on a stand-alone basis, the rating reflects some degree of implicit support from Avon's parent company, Natura & Co (Natura). The coronavirus outbreak could hit both Natura's direct selling division and its retail business, owing to the temporary closure of stores in a number of countries, reducing its ability to support Avon in case of need. The extent of the impact of the coronavirus outbreak on the operating performance of both Avon and Natura is still uncertain. Any recovery prospects once the outbreak is ended will be hampered by reduced macroeconomic growth, reduced consumer confidence and lower consumer disposable income. The rating review process will focus on (1) the degree and extension to which the spread of the coronavirus will impair the company's business; (2) the flexibility of the company to adapt its cost structure and preserve cash; (3) the recovery prospects after the normalization of operations in the context of a weakened macroeconomic environment; and (4) the potential support to be provided by Natura in terms of liquidity and with regards to the refinancing of the 2022 debt maturities. Moody's expects to conclude the review within the next three months. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Avon of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Environmental considerations are not considered material to Avon's credit profile. Social risks are a meaningful consideration given the company's direct sales business model, as changing demographics, economic and employment conditions can affect the company's ability to recruit and retain its sales force and can also influence how consumers shop. The business model can also come under scrutiny by regulators. In terms of governance, Avon is now a fully owned subsidiary of Natura, who adheres to high governance standards and has an history of prudent financial policy, commitment to specific leverage targets and a stated dividend policy. However, it is still unclear how the capital structure and liquidity of Avon will be managed within the Natura group, and Moody's notes that should Natura implement aggressive financial policies at Avon's level, this may hamper Avon's credit profile. LIQUIDITY Avon's liquidity is adequate, supported by US$651 million of available cash as of December 2019. However, following the acquisition by Natura, Avon does not have any revolving credit facility in place and relies on Natura providing sufficient external liquidity in case of need. Moody's estimates that the company's liquidity's buffer will be sufficient to cope with a short-period of business disruption. Avon has US$900 million of debt maturing in 2022 and Moody's assumes these to be refinanced within the Natura group. However, a prolonged period of business disruption for both Avon and Natura with weak recovery prospects might impair the group's ability to refinance these maturities, also because Natura will face significant debt maturities in the next two years. STRUCTURAL CONSIDERATIONS The Ba1 instrument rating of the senior secured notes issued by AIO and AIC, reflects the instruments' priority position in the capital structure. The secured notes benefit from the loss absorption provided by the significant amount of unsecured debt ranking below in the waterfall of liabilities. The security and guarantee structure of the senior secured notes include an unconditional guarantee from Avon, AIC, AIO and their restricted subsidiaries, representing approximately 85% of consolidated assets. The notes are secured by first priority liens on, and security interests in, substantially all of the assets of the AIO, AIC and the subsidiary guarantors subject to certain exceptions. The B3 instrument rating of the senior unsecured notes issued by the parent, Avon, reflects the effective subordination of these instruments to the senior secured notes. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings are currently on review for downgrade. Prior to the ratings review process, Moody's said that the ratings could be lowered in case of (1) failure to restore operating performance, with stabilization of sales and recovery in operating margin; (2) Moody's-adjusted gross Debt/EBITDA remaining above 5.5x on a sustained basis; (3) Natura adopting financial policies that are detrimental to Avon's creditors, such as large cash upstreaming. Prior to the ratings review process, Moody's said that positive pressure on the ratings could develop in case of (1) evidence of stronger support from Natura, such as the provision of an explicit guarantee on Avon's debt or if Avon's debt is refinanced at the parent company level; (2) successful execution of Avon's turnaround initiatives leading to material operating performance improvement, with EBIT margin approaching 10%; (3) Moody's-adjusted gross Debt/EBITDA improving to below 4.5x on a sustained basis; (4) materially positive free cash flow on a sustained basis. LIST OF AFFECTED RATINGS Issuer: Avon Products, Inc. On Review for Downgrade: Probability of Default Rating, Placed on Review for Downgrade, currently B1-PD Corporate Family Rating, Placed on Review for Downgrade, currently B1 Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently B3 Outlook Action: Outlook, Changed To Ratings Under Review From Negative Issuer: Avon International Operations, Inc. On Review for Downgrade: Backed Senior Secured Regular Bond/Debenture, Placed on Review for Downgrade, currently Ba1 Outlook Action: Outlook, Changed to Ratings Under Review from Negative Issuer: Avon International Capital PLC On Review for Downgrade: Backed Senior Secured Regular Bond/Debenture, Placed on Review for Downgrade, currently Ba1 Outlook Action: Outlook, Changed to Ratings Under Review from Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Consumer Packaged Goods Methodology published. CORPORATE PROFILE Avon is a global beauty product company and one of the largest direct sellers through around five million active representatives. Avon's products are available in over 70 countries and include categories such as color cosmetics, skin care, fragrance and fashion and home. Avon generated about $5.0 billion in revenue and $380 million in EBITDA (Moody's adjusted) in 2019. BAY CIRCLE: Gateway Objects to Disclosure Statement --------------------------------------------------- SEG Gateway, LLC and Good Gateway, LLC, filed a joinder in Chapter 11 Trustee's Objection to Disclosure Statement for Plan of Reorganization for Sugarloaf Centre, LLC, a Debtor Affiliate of Bay Circle Properties, LLC, DCT Systems Group, LLC, Nilhan Developers, LLC, and NRCT, LLC, Proposed by Chuck Thakkar, Niloy Thakkar, and Rohan Thakkar (the Thakkars): * Gateway objects to the lack of transparency in the equity ownership of Debtor Sugarloaf Centre, LLC (Sugarloaf) because it obscures Gateway’s indirect ownership and management interests. * Sugarloaf is owned 100% by Sugarloaf Centre Partners, LLC (Sugarloaf Partners). Sugarloaf Partners is owned 50% by Debtor NRCT, LLC (NRCT) and 50% by NCT Systems, Inc. (NCT). NRCT is owned 50% by Rohan Thakkar and 50% by Niloy Thakkar. NCT is owned 100% by Gateway. * Under the terms of the Sugarloaf Partners operating agreement, NRCT has lost its management role, leaving NCT as the managing member. Additionally, Gateway holds a judgment for $3,600,000 against Rohan Thakkar. A full-text copy of Gateway's objection to the Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/uvtpz4l from PacerMonitor at no charge. Attorneys for Good Gateway, LLC and SEG Gateway, LLC: BALCH & BINGHAM LLP 30 Ivan Allen Jr. Boulevard, N.W., Suite 700 Atlanta, GA 30308 Telephone: (404) 261-6020 Facsimile: (404) 261-3656 E-mail: wjones@balch.com aalexander@balch.com About Bay Circle Properties, et al. Bay Circle Properties, LLC, DCT Systems Group, LLC, Sugarloaf Centre, LLC, Nilhan Developers, LLC, and NRCT, LLC, own 16 different real properties including significant undeveloped acreage. The properties also include office and warehouse buildings, retail shopping centers and free standing single tenant buildings. Bay Circle Properties, et al., filed Chapter 11 bankruptcy petitions (Bankr. N.D. Ga. Case Nos. 15-58440 to 15-58444) on May 4, 2015. The Chapter 11 cases are jointly administered. In the petition signed by Chuck Thakkar, manager, Bay Circle estimated $1 million to $10 million in assets and liabilities. The Debtors tapped John A. Christy, Esq., J. Carole Thompson Hord, Esq., and Jonathan A. Akins, Esq., at Schreeder, Wheeler & Flint, LLP, as bankruptcy attorneys. The Debtors engaged RG Real Estate, Inc., as real estate broker. Ronald L. Glass was appointed as Chapter 11 trustee for the Debtors. The trustee tapped Morris, Manning & Martin, LLP as his bankruptcy counsel; GlassRatner Advisory & Capital Group, LLC as his financial advisor; and Nelson Mullins Riley & Scarborough LLP as special counsel. BAY CIRCLE: Nilhan Trustee Objects to Disclosure Statement ---------------------------------------------------------- Douglas N. Menchise, chapter 7 Trustee for Nilhan Financial, LLC, objects to the Disclosure Statement for Plan of Reorganization for Sugarloaf Centre, LLC, a Debtor Affiliate of Bay Circle Properties, LLC, DCT Systems Group, LLC, Nilhan Developers, LLC, and NRCT, LLC, proposed by Chuck Thakkar, Niloy Thakkar and Rohan Thakkar, showing the Court as follows: * The Thakkars allege that the reasons for filing the chapter 11 Petition was to stop a foreclosure on the Real Property. And the Real Property is apparently located in Henry County, Georgia. However, it is unclear what real property the Disclosure Statement is referring to. Upon information and belief, Sugarloaf has never owned real property in Henry County, Georgia. * The Plan and the Disclosure Statement contradict each other. The Plan provides that the source of funds for Plan payments will be post-confirmation business operations. Yet, the Disclosure Statement provides that all claims will be paid from funds on hand and surrender of the real property to the secured creditor. * The Disclosure Statement fails to disclose the identity of the proposed equity holders and management of Sugarloaf post-confirmation. * Unless and until the above objections and the objections raised in the separate Objections and/or Responses that may be filed on March 17, 2020, by the Chapter 11 Trustee and SEG Gateway, LLC and Good Gateway, LLC are adequately addressed, creditors do not have adequate information in order to make an informed judgment as to whether the Plan is in their best interests. A full-text copy of Chapter 7 Trustee's objection to Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/sqkuwz4 from PacerMonitor at no charge. Counsel For Douglas N. Menchise: PAUL REECE MARR, P.C. Paul Reece Marr 300 Galleria Parkway, Suite 960 Atlanta, GA 30339 Tel: 770-984-225 E-mail: paul.marr@marrlegal.com About Bay Circle Properties, et al. Bay Circle Properties, LLC, DCT Systems Group, LLC, Sugarloaf Centre, LLC, Nilhan Developers, LLC, and NRCT, LLC, own 16 different real properties including significant undeveloped acreage. The properties also include office and warehouse buildings, retail shopping centers and free standing single tenant buildings. Bay Circle Properties, et al., filed Chapter 11 bankruptcy petitions (Bankr. N.D. Ga. Case Nos. 15-58440 to 15-58444) on May 4, 2015. The Chapter 11 cases are jointly administered. In the petition signed by Chuck Thakkar, manager, Bay Circle estimated $1 million to $10 million in assets and liabilities. The Debtors tapped John A. Christy, Esq., J. Carole Thompson Hord,Esq., and Jonathan A. Akins, Esq., at Schreeder, Wheeler & Flint, LLP, as bankruptcy attorneys. The Debtors engaged RG Real Estate, Inc., as real estate broker. Ronald L. Glass was appointed as Chapter 11 trustee for the Debtors. The Trustee tapped Morris, Manning & Martin, LLP as his bankruptcy counsel; GlassRatner Advisory & Capital Group, LLC as his financial advisor; and Nelson Mullins Riley & Scarborough LLP as special counsel. BAY CIRCLE: Trustee Objects to Thakkars' Disclosure Statement ------------------------------------------------------------- Ronald L. Glass, chapter 11 trustee for the bankruptcy estate of Sugarloaf Centre, LLC, objects to the Disclosure Statement for Plan of Reorganization for Sugarloaf Centre, LLC, a debtor affiliate of Bay Circle Properties, LLC, DCT Systems Group, LLC, Nilhan Developers, LLC, and NRCT, LLC, proposed by Chuck Thakkar, Niloy Thakkar and Rohan Thakkar. The Trustee in its objection points out that: * The Disclosure Statement fails to (a) state the amount of debt allegedly owed to SIMBA/Red Chillies, including the amount of unpaid accrued interest proposed to be paid on the Effective Date of the Plan, (b) identify the collateral securing the debt allegedly owed to SIMBA/Red Chillies, (c) the value of the collateral proposed to be surrendered to SIMBA/Red Chillies, and (d) what interest SIMBA and/or Red Chillies have in the collateral. * The Disclosure Statement fails to disclose the relationship between SIMBA and Red Chillies and why the two seemingly separate entities are grouped together as a single claim holder. The Disclosure Statement fails to disclose how, in light of this assignment, SIMBA retained any interest in the debt owed by or collateral owned by Debtor. * The Disclosure Statement fails to disclose the relationship between the Thakkars and SIMBA and Red Chillies. The Red Chillies Assignment was executed by Chuck Thakkar, as manager of Red Chillies. * The Disclosure Statement also fails to disclose the assignment to Westmoore of the loan by SIMBA to Debtor. Further, the Disclosure Statement fails to disclose how, in light of this assignment, the claim holder could be SIMBA/Red Chillies, and not Westmoore. * The Disclosure Statement fails to identify all persons and entities with an interest in the Debtor. While the Disclosure Statement states that Debtor is owned 100% by Sugarloaf Centre Partners, LLC, it fails to disclose the owner(s) of that entity. * The Disclosure Statement fails to provide any information to enable creditors to compare estimated distributions in a hypothetical chapter 7 liquidation to projected distributions under the Thakkars' Plan. A full-text copy of the Trustee's objection to the Thakkars' Disclosure Statement, which objection was filed March 17, 2020, is available at https://tinyurl.com/uqzx5xf from PacerMonitor at no charge. Counsel for the Chapter 11 Trustee: MORRIS, MANNING & MARTIN LLP Frank W. DeBorde Lisa Wolgast 3343 Peachtree Rd., N.E., Suite 1600 Atlanta, Georgia 30326 Telephone: (404) 233-7000 E-mail: fwd@mmmlaw.com lwolgast@mmmlaw.com About Bay Circle Properties, et al. Bay Circle Properties, LLC, DCT Systems Group, LLC, Sugarloaf Centre, LLC, Nilhan Developers, LLC, and NRCT, LLC, own 16 different real properties including significant undeveloped acreage. The properties also include office and warehouse buildings, retail shopping centers and free standing single tenant buildings. Bay Circle Properties, et al., filed Chapter 11 bankruptcy petitions (Bankr. N.D. Ga. Case Nos. 15-58440 to 15-58444) on May 4, 2015. The Chapter 11 cases are jointly administered. In the petition signed by Chuck Thakkar, manager, Bay Circle estimated $1 million to $10 million in assets and liabilities. The Debtors tapped John A. Christy, Esq., J. Carole Thompson Hord, Esq., and Jonathan A. Akins, Esq., at Schreeder, Wheeler & Flint, LLP, as bankruptcy attorneys. The Debtors engaged RG Real Estate, Inc., as real estate broker. Ronald L. Glass was appointed as Chapter 11 trustee for the Debtors. The trustee tapped Morris, Manning & Martin, LLP as his bankruptcy counsel; GlassRatner Advisory & Capital Group, LLC as his financial advisor; and Nelson Mullins Riley & Scarborough LLP as special counsel. BCPE EMPIRE: S&P Alters Outlook to Negative, Affirms 'B' ICR ------------------------------------------------------------ S&P Global Ratings affirmed its 'B' issuer credit rating on BCPE Empire Holdings Inc. (d.b.a. Imperial Dade) Empire Holdings Inc. (d.b.a. Imperial Dade). S&P revised the outlook to negative from stable. The negative outlook reflects the risk of slower leverage reduction as recent restaurant, event, education, and government institution closures likely reduce demand. "Previously, we anticipated leverage of 7x by the end of 2020 through earnings expansion from tuck-in acquisitions coupled with operational efficiencies such as route optimization and improved sales productivity. However, we believe the closure of certain establishments to contain the coronavirus pandemic could reduce volumes and revenue. Despite Imperial's highly variable cost structure, this may lead to some near-term margin compression until cost cuts have an impact, which may materially constrain financial flexibility. While the company also benefits from modest working capital and capital expenditure (capex) requirements, we now project a U.S. recession that will result in declining consumer discretionary spending and an economic slowdown. We believe a substantial demand slowdown may lead to free operating cash flow (FOCF) deficits and leverage significantly above 7x by the end of 2020," S&P said. The negative outlook reflects increased risk for Imperial's leverage to remain above 7x, with cash flow metrics deteriorating below the minimum required to support the 'B' issuer credit rating. "We would lower the rating in the next 12 months if demand slows significantly, leading to significant pressure on profitability and increasing leverage over 7x on a sustained basis," S&P said. "We would revise the outlook to stable if Imperial's business model appears resilient despite the slowing economy, and the company maintains leverage below 7x," the rating agency said. BDF ACQUISITION: S&P Downgrades ICR to 'CCC+'; Outlook Negative --------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on U.S.-based specialty furniture retailer BDF Acquisition Corp. (Bob's Discount Furniture) two notches to 'CCC+' from 'B'. S&P also lowered its issue-level rating on the company's term loan B by two notches to 'CCC+'; the '3' recovery rating is unchanged. "We believe store closures and social distancing mandates associated with the coronavirus will significantly weaken BDF's performance. BDF announced it would temporarily close all stores starting March 21, 2020, indefinitely. The company will continue to operate its online channel, which generated less than 10% of total sales in fiscal 2019. Thus we believe BDF sales will decline around 90% while its stores do not operate. At this time, we do not expect significant acceleration in online sales that would replace a meaningful portion of lost in-store sales, because we believe consumers will reduce discretionary spending given the weakened macroeconomic outlook. We expect a significant decline in revenues and EBITDA, leading to leverage well above our previous expectations for the high-4x area," S&P said. The negative outlook reflects the risk BDF may come under a liquidity crunch, given expected declines in revenue and store closures stemming from the coronavirus pandemic. "We could lower our ratings if we believe it is increasingly likely BDF will face a liquidity crunch in the next 12 months. This could occur with prolonged store closures and no clear route for improving the company's liquidity position," S&P said. "We could raise the rating if we are confident the company will have adequate liquidity to weather store closures. This could occur if it executes a transaction to improve its liquidity position or if we expect stores to reopen soon," the rating agency said. BED BATH & BEYOND: S&P Lowers ICR to 'B+' on Operational Headwinds ------------------------------------------------------------------ S&P Global Ratings lowered all of its ratings on Union, N.J.-based home furnishing specialty retailer Bed Bath & Beyond Inc. (BBBY), including its issuer credit rating to 'B+' from 'BB'. The downgrade reflects S&P's view of BBBY's earnings prospects as meaningfully weakened and the rating agency's expectation for significant deterioration in credit metrics this year. BBBY recently announced the temporary closure of all but 175 of its 1,500+ stores across North America from March 23 through April 3, 2020. S&P believes closures, which temporarily elevate cash burn, could be extended for more than a month, given the increasingly drastic actions governments are taking to quell the rapid rise in new COVID-19 cases. BBBY's online channel, representing a moderate percentage of total revenues, remains operational and could modestly offset some of the impact from the closed stores. Still, S&P believes consumer demand will be depressed over the next few quarters as confidence rapidly deflates from mounting uncertainty over the severity and duration of the outbreak. In addition, S&P expects consumers to trade down to lower-priced merchandise offered by competing discounters and mass merchandisers during an economic slowdown, further depressing BBBY's already challenged sales and margins. As a result, S&P believes credit metrics will deteriorate significantly in the near term, resulting in leverage spiking up to above 4x at the end of fiscal 2020 from just about 3x at the end of third-quarter fiscal 2019. Moreover, the rating agency thinks that near-term performance pressures could erode headroom on the 3.75x maximum leverage covenant under BBBY's revolving credit facility, requiring the company to seek a waiver or amendment. As pressure alleviates beginning in the second half of calendar year 2020, S&P expects gradual improvement in BBBY's credit metrics, with leverage improving to the high-3x area at the end of fiscal 2021. As a result of its projection for higher leverage, S&P is revising its financial risk profile assessment to aggressive from intermediate. The negative outlook reflects the heightened uncertainty regarding the impact of the coronavirus pandemic and impending recession on BBBY's financial condition. A prolonged store closure, coupled with a slowdown in consumer spending could affect the company's ability to recover operationally. "We could lower the rating if BBBY cannot recover from the effects of pandemic or the subsequent recessionary macroeconomic environment is more severe and prolonged than we currently expect, such that leverage rises to and stays above the 5x area at the end of fiscal 2021. In addition, we could also lower the rating if BBBY continues to lose market share while making no significant headway on its initiatives, leading us to view its competitive standing less favorably," S&P said. "We could revise the outlook to stable if the impact of the pandemic is less severe than what we currently anticipate. For a higher rating, we would expect to see significant traction on the company's strategic initiatives, resulting in stabilizing operating performance. Under this scenario, we would expect leverage below 5x and positive free operating cash flow on a sustained basis," the rating agency said. BIOLASE INC: Reports $17.9 Million Net Loss in 2019 --------------------------------------------------- Biolase, Inc., filed with the Securities and Exchange Commission its Annual Report on Form 10-K reporting a net loss of $17.85 million on $37.80 million of net revenue for the year ended Dec. 31, 2019, compared to a net loss of $21.52 million on $46.15 million of net revenue for the year ended Dec. 31, 2018. As of Dec. 31, 2019, the Company had $31.85 million in total assets, $27.51 million in total liabilities, $3.96 million in total redeemable preferred stock, and $377,000 in total stockholders' equity. The Company has reported losses from operations of $15.6 million, $20.9 million, and $18.0 million for the years ended Dec. 31, 2019, 2018, and 2017, respectively, and has not generated cash from operations for the years ended Dec. 31, 2019, 2018, and 2017. As of Dec. 31, 2019, the Company was not in compliance with debt covenants of the Credit Agreement with SWK Funding, LLC and obtained a waiver as part of a Fourth Amendment to Credit Agreement in March 2020. The Company does not anticipate it will regain compliance by March 31, 2020, therefore the Company has reclassified the Term Loan from a long-term liability to a current liability in the consolidated balance sheets. BDO USA, LLP, in Costa Mesa, California, the Company's auditor since 2005, issued a "going concern" qualification in its report dated March 27, 2020 citing that the Company has suffered recurring losses from operations, has negative cash flows from operations and has uncertainties regarding the Company's ability to meet its debt covenants and service its debt. These factors, among others, raise substantial doubt about its ability to continue as a going concern. A full-text copy of the Form 10-K is available for free at: https://is.gd/cHXFm5 About BIOLASE BIOLASE -- http://www.biolase.com/-- is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry, and medicine. BIOLASE's products advance the practice of dentistry and medicine for patients and healthcare professionals. BIOLASE's proprietary laser products incorporate approximately patented 208 and 56 patent-pending technologies designed to provide biologically clinically superior performance with less pain and faster recovery times. BIOLASE's innovative products provide cutting-edge technology at competitive prices to deliver superior results for dentists and patients. BIOLASE's principal products are revolutionary dental laser systems that perform a broad range of dental procedures, including cosmetic and complex surgical applications, and a full line of dental imaging equipment. BIOLASE has sold over 41,000 laser systems to date in over 80 countries around the world. Laser products under development address BIOLASE's core dental market and other adjacent medical and consumer applications. BLUE EAGLE: Jones Buying Gadsden Properties for $25K ---------------------------------------------------- Forse Investments, LLC, an affiliate of Blue Eagle Farming, LLC, asks the U.S. Bankruptcy Court for the Northern District of Alabama to authorize the sale of the real properties located in Etowah County, Alabama listed in its Schedules as "1804 Third Street, Gadsden, Alabama" and "1712 Alabama St.," tax parcel identification numbers 16-02-09-4-000-136.00, 16-02-09-4-000-137.00 and 16-02-09-4-000-140.00, to John R. and Earnestine D. Jones for $25,000. Forse originally purchased the Properties for around $130,000. However, since the time Forse purchased the Properties, the surrounding buildings have been torn down or are in disrepair, which has greatly decreased the value of the Properties. Presently Forse proposes to sell the Properties to the Purchasers. On Feb. 5, 2020, Forse entered into a Purchase Agreement with the Purchasers. The Purchasers agree to pay a total price of $25,000 for the Properties. There will be no real estate agent fee in connection with the sale. The tax assessor values for the parcels are as follows: (i) 16-02-09-4-000-136.00 - $7,300; (ii) 16-02-09-4-000-137.00 - $2,700, and (iii) 16-02-09-4-000-140.00 - $2,500. The Purchasers are in no way affiliated with Debtors personally or professionally. Forse has concluded that the sale of the Properties presents the best option for maximizing the value to creditors of Forse's estate. A copy of the Agreement is available at https://tinyurl.com/rpkr95d from PacerMonitor.com free of charge. About Blue Eagle Farming Blue Eagle Farming and H J Farming are engaged in the business of cattle ranching and farming. Blue Smash Investments operates in the financial investment industry; War-Horse Properties manages companies and enterprises; Eagle Ray Investments and Forse Investments are lessors of real estate while Armor Light, LLC, is engaged in the business of residential building construction. Blue Eagle Farming, LLC, and its affiliate H J Farming, LLC, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ala. Case Nos. 18-02395 and 18-02397) on June 8, 2018. On June 9, 2018, five Blue Eagle affiliates filed Chapter 11 petitions: Blue Smash Investments LLC, Eagle Ray Investments LLC, Forse Investments LLC, Armor Light LLC, and War-Horse Properties, LLLP (Bankr. N.D. Ala. Case Nos. 18-81707 to 18-81711). The cases are jointly administered under Case No. 18-02395. In the petitions signed by Robert Bradford Johnson, general partner of Blue Eagle Farming, LLC's sole owner, Blue Eagle was estimated to have $1 million to $10 million in assets and $100 million to $500 million in liabilities as of the bankruptcy filing. Judge Tamara O. Mitchell presides over the cases. Burr & Forman LLP is the Debtors' legal counsel. BRIGHT HORIZONS: S&P Alters Outlook to Negative, Affirms 'BB-' ICR ------------------------------------------------------------------ S&P Global Ratings revised its outlook to negative from positive and affirmed its ratings on Bright Horizons Family Solutions LLC, including its 'BB-' issuer credit rating. The COVID-19 pandemic and a broader economic downturn are expected to significantly affect Bright Horizons' operations through the second half of this year or longer. Given the high uncertainty about the rate of spread and peak of the coronavirus pandemic, S&P assumes it will peak between June and August, which could hinder the company's ability to reopen centers. The negative outlook reflects the heightened uncertainty regarding the impact of the coronavirus pandemic and impending recession on Bright Horizon's credit metrics. This could result in leverage rising to the mid- to high-4x area on a sustained basis. "We could lower the ratings if Bright Horizons' credit metrics weaken such that adjusted debt to EBITDA rises to the mid- to high-4x area on a sustained basis. This could occur if the impact of the pandemic and subsequent recessionary macroeconomic environment are more severe and prolonged than we expect, delaying center reopenings and operating performance improvements to later this year and beyond," S&P said. "We could revise the outlook to stable if the impact from the pandemic and weak economy is less severe than we anticipate, and revenues and earnings significantly rebound later this year and into 2021. Under this scenario, we would anticipate sustained leverage of 3.5x or below," S&P said. BRITTANYS VILLA: Seeks to Hire Cushner & Associates as Counsel -------------------------------------------------------------- Brittanys Villa Corp seeks approval from the U.S. Bankruptcy Court for the Eastern District of New York to hire the Law Offices of Cushner & Associates P.C. as its legal counsel. The firm will provide legal services in connection with the Debtor's Chapter 11 case, which include the preparation of a plan of reorganization and disclosure statement. The firm will be paid at these rates: Todd Cushner, Esq. Senior Attorney $500 per hour James Rufo, Esq. Associate Attorney $400 per hour Charles Higgs, Esq. Of Counsel $400 per hour Paralegals $200 per hour The Debtor paid Cushner & Associates the sum of $15,000. Cushner & Associates is "disinterested" within the meaning of Section 101(14) of the Bankruptcy Code, according to court filings. The firm can be reached through: Todd S. Cushner, Esq. James J. Rufo, Esq. Cushner & Associates, P.C. 399 Knollwood Road Suite 205 White Plains, New York 10603 Tel: 914.600-5502 Fax: 914.600-5544 Email: todd@Cushnerlegal.com jrufo@cushnerlegal.com About Brittanys Villa Corp Brittanys Villa Corp sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y. Case No. 20-40898) on Feb. 13, 2020. At the time of the filing, the Debtor had estimated assets of less than $50,000 and liabilities of between $500,001 and $1 million. Judge Elizabeth S. Stong oversees the case. The Debtor tapped Cushner & Associates, P.C. as its legal counsel. BROWN JORDAN: S&P Downgrades ICR to 'CCC+' Over Coronavirus Impact ------------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on U.S.-based Brown Jordan International Inc. to 'CCC+' from 'B' to reflect its view that the company's performance will be weaker because of its participation in the cyclical furniture industry. S&P is lowering its ratings on the company's first-lien term loan to 'CCC+'. The recovery rating remains a '3', indicating S&P's expectation of 50%-70% recovery (rounded estimate: 65%) in the event of a default. The company's EBITDA will deteriorate during the recession, leading to a potential covenant breach. S&P expects the travel halt and ensuing recession stemming from the coronavirus pandemic to lead to a pullback in hospitality and consumer discretionary spending, reducing demand for the company's products. It estimates the company could breach its net leverage covenant over the next few quarters without a cure. S&P believes the company will reduce payroll costs in its factories to align with expected volume decreases. In the event of a covenant breach, S&P believes the company's sponsor, Littlejohn & Co., could provide an equity cure. The credit agreement allows for five equity cures through the life of the term loan, though it only allows a maximum of two cures in a single fiscal year. Additionally, the cure amount is capped at the minimum amount needed to remedy the covenant breach. As such, S&P expects the company may need to amend its leverage covenant to remain in compliance over the longer term. "We could downgrade the ratings over the next 12 months if we believe an economic recovery will take longer than anticipated," S&P said. "We could lower the ratings if we believe a default is imminent in the next 12 months as a result of a prolonged recession, resulting in continued depressed hospitality and discretionary spending," the rating agency said. S&P could upgrade the ratings if the U.S. economy recovers and it expects demand will be restored, resulting in sustained improvements in the company's cash flow, liquidity, and overall debt leverage. BRYCE-COLE LLC: U.S. Trustee Unable to Appoint Committee -------------------------------------------------------- The Office of the U.S. Trustee on March 31 disclosed in a court filing that no official committee of unsecured creditors has been appointed in the Chapter 11 case of Bryce-Cole LLC. About Bryce-Cole LLC Bryce-Cole LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.S.C. Case No. 20-01116) on March 2, 2020, listing under $1 million in both assets and liabilities. Michael W. Mogil, Esq. at the Law Office of Michael W. Mogil, P.A. serves as the Debtor's counsel. BURLINGTON STONES: Fitch Affirms BB+ LT IDR & Alters Outlook to Neg ------------------------------------------------------------------- Fitch Ratings has affirmed Burlington Stores, Inc.'s ratings, including its Long-Term Issuer Default Rating (IDR) at 'BB+'. The Rating Outlook has been revised to Negative from Stable. The Negative Outlook reflects the significant business interruption from the coronavirus and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around 7.0x in 2020 from 3.4x in 2019 based on EBITDA declining to approximately $260 million from $875 million in 2019 on an approximately 25% sales decline to $5.4 billion. Adjusted leverage is expected to be around 4.0x in 2021, assuming sales declines of around 10% and EBITDA declines of around 20% from 2019 levels. Burlington's proactive revolver draw, which Fitch assumes is repaid in 2021, increases 2020 leverage by approximately 0.5x. Adjusted leverage could return below 4.0x, in 2022 assuming a sustained topline recovery. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Burlington has sufficient liquidity to manage operations through this downturn. The company ended 2019 with $400 million of cash and recently drew down $400 million on its $600 million asset-based revolver. The company's next term loan maturity is in 2024; its asset-based revolver matures in June 2023. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retailer stores and restaurants in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved; and the economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch envisages a scenario where discretionary retailers are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online - though Burlington does not have an online presence, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid- to high-single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expects total 2021 sales could remain 8%-10% below 2019 levels. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, yielding 2022 as a growth year. Assuming this scenario, Fitch expects Burlington's revenue to decline around 25% in 2020 with EBITDA declines approaching 70% to approximately $260 million. In 2021, Fitch expects revenue to decline around 10%, with EBITDA down around 20% relative to 2019 levels. Burlington has announced temporary store closures and has drawn $400 million of its $600 million asset-based revolver. The company also indicated it is examining its cost structure, including operating expenses and capex, for reductions, and has suspended share repurchases. Fitch estimates that FCF could decline from around $560 million in 2019 to a near-breakeven in 2020, as EBITDA declines are only somewhat mitigated by working capital and capex reduction opportunities. Improved Operating Trends: Burlington has significantly improved its operating trajectory in recent years, through both internal efforts and growth in the off-price retail channel. Revenues grew approximately 50% to $7.3 billion, and EBITDA grew at a CAGR of 15% over the last five years to approximately $874 million in 2019. Positive comps, which have averaged 3% annually, have been driven by improved merchandise assortment and in-store execution and continued growth in the value off-price channel, which has taken share from department stores and specialty retailers. Burlington has invested in inventory buying and management initiatives to better match assortments to customer needs and lower markdowns. The company has also been focused on achieving a good balance between pack and hold inventory, pre-season purchasing and sourcing in-season close outs. EBITDA margins have expanded to approximately 12.0% in 2019 from 8.4% in 2011, although Burlington's margins continue to trail those of leading peers, TJX and Ross Stores, which have moved up to the mid-teens. Burlington's merchandising and inventory planning efforts have been directed toward key initiatives to improve mix. For example, the company has increased penetration in higher growth categories such as women's ready to wear apparel, beauty, accessories and footwear, and home while decreasing exposure to coats, a highly seasonal category. The company views the home category as its largest growth opportunity, where its 15% sales penetration lags peers at 26%-33%. Women's apparel also continues to be a key opportunity, where Burlington's penetration of 22% is lower than peers at around 30%. In addition to its category efforts, Burlington has been editing its brand assortment across categories and adding strong, traffic-driving national brands. To improve the in-store experience, Burlington has invested in better signage, lighting and improved associate-customer engagement, with capex averaging around 4% of revenues for the last four years. In addition to remodeling its existing stores that range from 40,000 to 80,000 sf, Burlington has been introducing smaller store formats that are much closer in size to its peers. The stores opened in 2019 averaged around 42,000 sf, compared to an average store size of 28,000 sf for Ross and 27,000 to 29,000 sf for T.J. Maxx and Marshalls. Off-Price Model Well Positioned: The off-price segment has enjoyed good growth through and since the recession, as consumers have maintained their quest for value despite economic recovery. TJX (excluding international), Ross Stores and Burlington have grown in revenue over the last 10 years, while department store industry sales have seen declines. Off-price retailers aim to offer consumers premium and moderate national brands at everyday low prices. These retailers take advantage of excess inventory from other segments, such as department stores, or directly from manufacturers. More recently, department stores have been focusing on their own off-price formats, such as Nordstrom Rack, Saks OFF 5th and Macy's Backstage. These formats allow department stores to take advantage of the growth in the off-price channel with product increasingly made for that channel and to clear excess full-price inventory. While the off-price channel has performed well because of its treasure hunt aspect, the shopping experience is becoming increasingly consistent. Off-price retailers now sell a combination of excess inventory and inventory made specifically for their channel. This allows the retailers to offer a more complete shopping experience, such as good size/color options, while providing the consumer well-known national brands at a low price. As the inventory availability has become more consistent, most of the off-price players have also started offering customers the ability to shop their merchandise online (with Ross being the only major holdout). Ecommerce penetration, however, is expected to remain low for this segment given the in-store nature of the treasure hunt experience and difficulty leveraging fixed costs of putting limited assortment styles online. Burlington's model is differentiated from traditional off-price players such as Ross and TJX, as it couples a broad merchandise offering with an off-price retailer's approach to providing everyday low prices on branded products. TJX and Ross are more apparel-focused; with TJX using secondary store formats such as HomeGoods to sell a higher penetration of non-apparel merchandise. Burlington's relatively larger store size has been well suited to this strategy, although it has likely played a role in Burlington's weaker-than-peers productivity metrics. Sustained Long-Term Revenue Growth Expected: While the coronavirus pandemic and its economic aftermath is expected to impact Burlington's growth trajectory, potentially through 2021, Fitch projects that longer term Burlington can sustain top-line growth in the mid-single-digit range with around 2% comps growth and 2%-3% contribution from new stores, assuming about 30 net openings annually. Comps growth is predicated on ongoing improvements to the customer experience, merchandise category expansions, including home, and technology-enhanced inventory management and forecasting. The company, alongside value-oriented peers in the off-price, dollar store and deep discount spaces, continues to find real estate expansion opportunities at a time most retailers are opening few if any new locations, mostly supported by the strong growth momentum associated with the off-price concept at the expense of traditional mid-tier department and specialty apparel stores. Burlington has a long-term goal of growing its footprint to 1,000 stores from 727 stores at the end of 2019 to increase scale against larger competitors. Fitch believes there is some uncertainty around this target as the company's ability to grow to 1,000 stores may depend on competitive openings relative to growth in the off-price channel. Good FCF and Liquidity; Reasonable Credit Metrics: Prior to 2020, Burlington saw good FCF generation, which averaged around $400 million per year from 2017 to 2019. Beyond 2021, Fitch expects Burlington could return to this range. Based on Fitch's current forecast, FCF could weaken to near-breakeven in 2020 due to EBITDA declines, somewhat mitigated by proactive reductions to cash expenses such as capex. FCF could meaningfully improve to $300 million or more in 2021, assuming a significant rebound in revenue and EBITDA. Burlington ended 2019 with good liquidity of around $900 million, including approximately $400 million of cash and approximately $500 million of ABL availability. On March 19, 2020, the company indicated it had borrowed $400 million on their ABL facility as a precautionary measure. Fitch would expect Burlington to repay this amount by 2021, given Fitch's current operating assumptions. Ending liquidity in 2020 could remain near 2019 levels of $900 million, assuming breakeven FCF and minimal share repurchases. Lease-adjusted leverage was 3.4x at the end of 2019 versus 3.9x in 2016 and 5.9x in 2011, on both EBITDA growth and debt paydown. Adjusted leverage could climb to around 7.0x in 2020 (or the mid-6.0x range excluding the proactive ABL draw) on EBITDA declines but moderate to approximately around 4.0x in 2021 on EBITDA growth. DERIVATION SUMMARY Burlington Stores, Inc.'s 'BB+' IDR reflects good growth trajectory in both top line and EBITDA given a favorable backdrop of growth in the off-price channel and strong execution, strong FCF and declining leverage, offset by lower margins and sales productivity than industry peers. EBITDA growth has been somewhat predicated on Burlington narrowing its operational gap with off-price peers The TJX Companies, Inc. and Ross Stores, Inc. through improving merchandising and supply chain execution. For example, the company has had some success reducing reliance on seasonal merchandise, such as coats, in recent years, and is focusing on growing traffic-driving categories such as women's apparel and home. The Negative Outlook reflects the significant business interruption from the coronavirus and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around 7.0x in 2020 from 3.4x in 2019 based on EBITDA declining to approximately $260 million from $875 million in 2019 on an approximately 25% sales decline to $5.4 billion. Adjusted leverage is expected to be around 4.0x in 2021, assuming sales declines of around 10% and EBITDA declines of around 20% from 2019 levels. Burlington's proactive revolver draw, which Fitch assumes is repaid in 2021, increases 2020 leverage by approximately 0.5x. Adjusted leverage could return below 4.0x in 2022 assuming a sustained topline recovery. Similarly rated apparel and accessories peers include Capri Holdings Limited (BB+/Negative), Tapestry, Inc. (BB/Negative) and Levi Strauss & Co. (BB/Negative). Ratings for Capri and Tapestry reflect their strong U.S. positioning and global presence in the handbag and leather goods categories, while Levi's ratings reflect its strong global denim positioning. Operations for each of these players are dominated by a single brand, which somewhat limits diversification and heightens fashion risk. Both Capri and Tapestry have made leveraging acquisitions in recent years with somewhat disappointing subsequent performance, on continued sluggishness for Capri's Michael Kors brand and a difficult turnaround for Tapestry's acquired Kate Spade brand. Ratings and Negative Outlooks for each of these players reflect medium term consumer discretionary spending concerns triggered in part by the coronavirus pandemic. By the end of 2021, Fitch expects Capri's adjusted debt/EBITDAR could be in the mid-3x, somewhat supported by debt reduction, while adjusted debt/EBITDAR could trend around 4.0x for Tapestry and Levi. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer Here are Fitch's projections prior to disruption related to the coronavirus: -- Mid-single digit growth beginning 2020, reflective of low-single digit comps and around 25 new stores per year on a base of 727 at the end of 2019. Revenue was projected to expand from $7.3 billion in 2019 to around $8.4 billion in 2022. -- EBITDA growth was forecast to generally follow revenue, with expansion from approximately $875 million toward $1 billion in 2022; margins were expected to remain near the 12% recorded in 2019. -- FCF at around $400 million annually, and could have been used for share buybacks. Adjusted debt/EBITDAR, which was 3.4x in 2019, was expected to trend near this level over the medium term given EBITDA growth mitigated by rising rent expense. Here are Fitch's revised projections reflecting the significant business interruption from the coronavirus and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch projects Burlington's 2020 revenue could decline 25% to $5.4 billion and EBITDA could decline up to 70% to around $260 million, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. While 2021 revenue and EBITDA should significantly rebound from depressed 2020 levels, Fitch expects 2021 revenue of approximately $6.6 billion and EBITDA of around $675 million to be approximately 10% and 20% below 2019 levels given that a downturn could adversely impact discretionary spending through 2021. Fitch's revenue expectations reflect its views that U.S. retail discretionary spending will decline around 40% in 1H calendar 2020, decline mid- to high- single digits in 2H 2020, and sales in calendar 2021 will be down 8% to 10% from 2019 levels. -- Beginning 2022, Burlington could resume mid-single digit growth, predicated on low-single digit comps and store growth. -- FCF in 2020 could be near breakeven from around $560 million in 2019, largely due to a $600 million reduction in EBITDA, mitigated by lower cash taxes and proactive cuts to capex. FCF in 2021 could improve to above $300 million. Burlington does not pay a dividend and has suspended share repurchases, though share repurchases could resume in 2021 as operations stabilize. The company has no maturities until 2023, when its asset-based revolver matures. -- Adjusted debt/EBITDAR, which was 3.4x in 2019, could climb to 7.0x in 2020 and decline to around 4.0x, Fitch's current downgrade sensitivity, in 2021 on EBITDA swings. Adjusted debt/EBITDAR in 2020 is impacted by around 0.5x by Burlington's decision to draw $400 million on its ABL; Fitch expects this to be repaid in 2021. -- Burlington ended 2019 with $400 million in cash and recently drew down $400 million on its $600 million asset-based revolver. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Fitch could stabilize Burlington's outlook with improved confidence in the company's ability to stabilize sales and EBITDA with adjusted debt/EBITDAR (capitalizing leases at 8.0x) below 4.0x. -- An upgrade would result from resumption of 2%-3% comps growth and EBITDA margin in the low teens, combined with a public commitment to maintaining adjusted debt/EBITDAR under 3.5x. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A downgrade could occur from sustained weak operating trends and/or shareholder-friendly activity that result in adjusted debt/EBITDAR (capitalizing leases at 8.0x) sustained above 4.0x. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Burlington had $403 million in cash and $501.8 million available under its $600 million ABL revolver as of Feb. 1, 2020. The $600 million revolving credit facility, which matures in June 2023, has a first lien on inventory and accounts receivable and a second lien on real estate, property and equipment. On March 19, 2020, the company issued a press release stating that they had borrowed $400 million on their ABL facility as a precautionary measure. Fitch would expect Burlington to repay this amount by 2021, given Fitch's current operating assumptions. Burlington's remaining debt consists of a $1 billion term loan due November 2024. The term loan is secured by a first lien on real estate, favorable leases, machinery and equipment, as well as a second lien on inventory and receivables. The term loan does not contain any maintenance financial covenants. RECOVERY CONSIDERATIONS Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. Fitch assigned a 'BBB-'/'RR1' to Burlington's ABL and term loan, indicating outstanding recovery prospects (91% to 100%). SUMMARY OF FINANCIAL ADJUSTMENTS -- Historical and projected EBITDA is adjusted to add back non-cash stock-based compensation and exclude any one-time charges. For example, in 2019, Fitch added back $44 million in non-cash stock-based compensation to its EBITDA calculation. -- Fitch has adjusted the historical and projected debt by adding 8x yearly operating lease expense. BURLINGTON STORES: S&P Cuts ICR to 'BB' on Operational Pressures ---------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Burlington Stores Inc. to 'BB' from 'BB+'. S&P affirmed its 'BBB-' issue-level rating on the company's senior secured term loan facility. The '1' recovery rating is unchanged. Severely pressured operating results will cause credit metrics to significantly deteriorate this year. In response to the coronavirus outbreak, Burlington has temporarily closed all of its stores and agreed to compensate its associates for a two-week period. "We believe closures could be extended for over a month given the increasingly drastic social distancing mandates, which will result in temporary cash burn. In our view, the company's lack of online presence exacerbates its operating risks, as we believe the company is more exposed to prolonged store closures. For fiscal 2020, we now expect double-digit revenue declines and significant margin deterioration to cause a temporary spike in leverage, followed by subsequent improvement in the following year. Additionally, we believe the recovery trajectory in 2020, especially for discretionary categories such as home goods and apparel, will be slow as economic concerns and uncertainty lingers. As a result, we have revised our financial risk profile assessment to significant from intermediate," S&P said. The negative outlook reflects the heightened uncertainty regarding the impact of the coronavirus and impending recession on Burlington's operating performance. A prolonged store closure coupled with a slowdown in consumer spending could affect the company's ability to recover operationally and improve leverage to the sub-4x area in the next one to two years. "We could lower the ratings if consumer shopping habits move away from the in-store "treasure hunt" experience and evolve more rapidly towards online shopping following the pandemic, with lingering social distancing behaviors. This would result in ongoing decline in traffic and market shares at Burlington, and lead us to view the company's competitive position less favorably. We could also lower the rating if sales and EBITDA margins remain depressed and we no longer expect leverage to decline below 4x in fiscal 2021," S&P said. "We could revise the outlook to stable if the impact of the coronavirus is less severe than we currently anticipate, with sales and earnings beginning to rebound in the second half of the year. Under this scenario, we would expect a return to sustainable growth in fiscal 2021, with leverage normalizing below 4x," the rating agency said. CADENCE BANCORPORATION: S&P Alters Outlook to Neg, Affirms BB+ ICR ------------------------------------------------------------------ S&P Global Ratings revised the outlooks on the following institutions to negative from stable: BOK Financial Corp., Cadence Bancorporation, Comerica Inc., Cullen/Frost Bankers Inc., Hancock Whitney Corp., and Zions Bancorporation N.A. At the same time, S&P Global Ratings affirmed the issuer credit ratings on each institution and its subsidiaries (where relevant): -- BOK Financial Corp.: 'BBB+' -- Cadence Bancorporation: 'BB+' -- Comerica Inc.: 'BBB+/A-2' -- Cullen/Frost Bankers Inc.: 'A-' -- Hancock Whitney Corp.: 'BBB' -- Zions Bancorporation N.A.: 'BBB+' The outlook revisions primarily reflect S&P's view that plunging oil and natural gas prices could lead to asset quality deterioration for U.S. regional banks that have large direct energy exposures or those that operate in economies with a heavy reliance on the energy industry. In addition, the economic downturn associated with the COVID-19 pandemic, as well as increasing pressure on net interest margins given recent Fed rate cuts, could further strain these banks' financial performance over the next two years. These outlook revisions follow a broad review of U.S. regional banks with large energy-lending operations. The banks in this rating action all have outstanding energy loan exposures of 4%-18% of total loans and 32%-110% of Tier 1 capital as of year-end 2019. Many have other large loan portfolios that could also be hurt in the current economic environment, including construction and commercial and industrial loans. Potential downgrades of these six banks depend on numerous factors, including: -- How the relative riskiness of a bank's energy loan portfolio, as determined by sector exposure, concentration, and borrower strength, could affect asset quality; -- Broader asset quality trends, including our forecast of nonperforming assets and charge-offs; -- The sufficiency of capital to withstand possible credit losses; and -- The degree to which a bank's credit exposure to energy-dependent regions or to sectors sensitive to the COVID-19 pandemic weighs on its risk profile. "Overall, we believe that these regional banks are well-positioned to withstand some deterioration in their asset quality at current rating levels given historically low levels of nonperforming assets and net charge-offs as of year-end 2019. In addition, we believe any asset-quality deterioration as a result of exposure to the energy industry will likely not materialize significantly until at least mid-2020, given borrowers' hedging activities and conservative borrowing base advance rates on most loans," S&P said. "Nonetheless, we believe the unique catalysts for rapidly declining energy prices, including the failure of OPEC to reach an agreement on cutting supply, combined with a steep reduction in demand related to the COVID-19 pandemic, increase the likelihood that prices may remain low for an extended period. This could increase eventual losses in energy portfolios, all else being equal, in our opinion," S&P said. In addition, the capital markets have been largely closed to speculative-grade energy producers and other related companies, thus removing a source of funding that was largely available during the energy price decline in 2015-2016. As in prior downturns, S&P expects credit exposure to services companies to be the most vulnerable to financial stress, and exposure to exploration and production companies to be better protected given traditional borrowing base credit structures. Positively, the Federal Reserve's recent actions have increased liquidity for the banking industry and Congress passing the fiscal stimulus bills could help the economy. Nonetheless, the economic fallout associated with the COVID-19 pandemic and current ultra-low interest rates will likely lead to lower earnings and significantly worse asset quality, particularly in industries more affected by the virus. S&P will reassess its ratings and outlooks on these banks as the evolving environment necessitates, after considering peers at each rating level. BOK Financial Corp. Rationale The outlook revision on BOK Financial Corp. (BOK) primarily reflects the company's exposure to the oil and gas industry, as well as the economic fallout associated with the COVID-19 pandemic, which S&P expects will hurt bank industry performance in 2020. BOK's energy exposure, as a percent of loans and capital, is the highest among the U.S. regional banks S&P rates. At year-end 2019, BOK's energy loans outstanding were nearly $4.0 billion, or 18.3% of total loans and 110% of common equity Tier 1 capital. Unfunded energy commitments totaled an additional $3 billion, though defensive draws are generally limited by borrowing base credit structures. Almost 80% of the outstanding energy portfolio is to the production segment, most of which is first lien, senior secured and subject to a borrowing base; 95% of the energy borrowers have some level of hedging in place. In addition, 58% of BOK's energy lending is to the oil industry, while 42% is to gas, which has not seen as substantial a price decline thus far this year. S&P said, "While we do not believe that BOK has significant exposure to borrowers in other industries that are most hurt by COVID-19 (such as lodging or retail), we expect additional credit pressure in certain segments of non-energy commercial lending. We expect that delinquencies and problem loans may increase over the next few quarters, given the sharp economic downturn." As a buffer to these risks, BOK has relatively strong capital ratios, including a common equity Tier 1 (CET1) ratio of 11.39% and a tangible common equity to tangible assets ratio of approximately 8.98% as of year-end 2019. Though BOK's profitability will likely be affected in 2020 and next year by a lower net interest margins and higher credit provisions, nearly 40% of BOK's revenues come from noninterest fee revenues, which may offer a partial offset. Outlook S&P Global Ratings' negative outlook on BOK reflects the possibility that, given the company's energy exposure, asset quality could worsen over the next two years to a level that may not be in line with the company's consistently strong historical performance and current ratings. In addition, S&P expects BOK's earnings will be hurt by recent Fed rate cuts, although the overall impact to earnings will be muted partly by its larger-than-peers' contribution from noninterest income sources, such as mortgage finance and asset management. S&P said, "We could lower the ratings by one notch if we expect a substantial increase in nonperforming assets or net charge-offs. We could also lower the rating if we believe BOK's S&P Global Ratings risk-adjusted capital ratio will decline and remain sustainably below 7%." "Alternately, we could revise the outlook to stable if we believe that net loan losses will remain manageable, and if the economic environment rebounds so that we are more confident that BOK's overall financial performance will remain in line with similarly rated peers." Cadence Bancorporation Rationale S&P said, "The outlook revision on our ratings on Cadence Bancorporation reflects our view that the company could face weakening asset quality, higher provisions, and pressured earnings given current volatile market conditions within the energy industry, as well as its exposure to other sectors, such as restaurants, that appear highly vulnerable to the economic fallout resulting from the COVID-19 pandemic. At year-end 2019, Cadence's portfolio of energy-related loans represented 11% of total loans and included loans to midstream (62% of energy exposure), exploration and production (25%), and services (13%). Its restaurant exposure comprised 8% of loans at year end. Our current ratings on Cadence incorporate its concentrations in potentially higher risk loan classes and our expectations that loan losses could be more volatile than at many regional bank peers. We expect the company will maintain its S&P Global Ratings risk-adjusted capital ratio in the upper end of the 7%-10% range we deem adequate, and maintain its other capital measures at solid levels. We also view positively Cadence's improved funding and liquidity position in the past year, with less reliance on more volatile sources of funds such as brokered deposits. We believe these positive factors could help to sustain it in the face of what could be unstable market conditions over the next year. However, if asset quality or earnings weaken significantly, we could lower our ratings on Cadence." Outlook S&P Global Ratings' negative outlook on Cadence reflects the possibility that its asset quality could materially worsen due to its high exposure to vulnerable sectors such as energy and restaurant loans. S&P said, "In addition, we believe Cadence could face earnings pressures as a result of higher net charge-offs, requiring greater provisions for loan losses, and the likelihood of higher economic headwinds resulting from COVID-19 and its corresponding impact on the economy. Our current ratings on Cadence incorporate its concentrations in potentially higher risk loan classes, and our expectations that loan losses could be more volatile than at many regional bank peers. However, if Cadence's nonperforming assets or net charge-offs increase substantially more than our ratings anticipate, or if we believe that earnings will be hurt over a sustained period, we could lower our ratings within the next two years. Alternately, we could revise the outlook to stable if we believe that net loan losses will remain manageable, and if the economic environment rebounds so that we are more confident that Cadence's earnings will remain in line with similarly rated peers." Comerica Inc. Rationale S&P said, "The outlook revision on our long-term rating on Comerica Inc. primarily reflects the company's large loan exposure to the energy sector, which will likely be hurt by the recent sharp drop in oil prices, which may remain low for an extended period. In addition, we think loan performance could deteriorate given weaker U.S. economic growth resulting from the COVID-19 pandemic, particularly among its commercial borrowers, which represent a large proportion of its loan portfolio. More specifically, Comerica's exposure to energy loans of nearly 5% of total loans and construction loans of nearly 8% of total loans could see elevated credit deterioration given the current economic slowdown." "Also, we think the company's net interest margin will decline further throughout 2020 and overall profitability will weaken given recent Fed rate cuts and lower market interest rates, particularly given Comerica's much higher asset sensitivity. As of Dec. 31, 2019, Comerica estimated that a 100-basis-point decline in interest rates would reduce noninterest income by $135 million, or 6%, per year. However, in January 2020, Comerica added interest-rate swaps that convert an additional $1 billion of variable-rate loans to fixed rates through cash flow hedges, which were not included in the company's year-end estimates. As an offset to these risks, we also consider that Comerica has a history of low loss experience and high earnings capacity, while the company's capital ratios, funding, and liquidity position remain solid, in our assessment." Outlook S&P said, "The negative outlook on Comerica reflects S&P Global Ratings' view that we could lower the rating given potential deterioration in loan performance amid low energy prices and a weakening economy, as well as net interest margin pressures. Nonetheless, we expect that Comerica will maintain conservative business and financial policies, and we expect the company to maintain stable capital ratios over the next two years. More specifically, we expect the company's CET1 ratio to remain near or above its 10% target even though we expect further pressure on its net interest margin." "We could lower the rating over the next two years if loan performance deteriorates substantially relative to peers, either due to persistent weakness in energy or degradation in the company's construction loan exposures as a result of a broader economic slowdown." "We could revise the outlook to stable if we believe that net loan losses will not be substantial, and if the economic environment rebounds so that we are more confident that Comerica's asset quality, earnings, and capital will remain solid and consistent with similarly rated peers." Cullen/Frost Bankers Inc. Rationale S&P said, "The outlook revision on our ratings on Cullen/Frost Bankers Inc. reflects the company's relatively high exposure to the energy sector that will likely be hurt by the recent sharp drop in and possibly persistently low oil prices. We believe the company's currently good asset quality could worsen to a level that is not commensurate with our ratings on Cullen." Additionally, there is elevated uncertainty about the credit performance of its substantial commercial loan portfolio as a whole, given the shock to the U.S. economy from the COVID-19 pandemic." As of year-end 2019, energy loans comprised about 11% of Cullen's total loans. (Loans are less than 50% of assets, so the exposure is a more manageable 58% of CET1.) About 83% of the portfolio is to the production segment, most of which is secured and subject to a borrowing base; however, the recent sharp decline in energy prices may cause collateral shortfalls. Additionally, construction loans are about 11% of loans, and this exposure could be more vulnerable to losses in an economic slowdown. As a buffer to these risks, Cullen has strong capital ratios, including a CET1 ratio of 12.36%, an S&P Global Ratings' risk-adjusted capital ratio of 12.6% and a tangible common equity to tangible assets ratio of approximately 9.3% as of year-end 2019. Similar to peers, Cullen's profitability will likely be constrained in the next few quarters by higher loan loss provisions, as well as a lower net interest margin because of the recent sharp drop in interest rates. However, S&P believes that Cullen has resilient earnings capacity, illustrated by its historically above-peers return on average assets and net interest margin. Outlook S&P Global Ratings' negative outlook on Cullen reflects the possibility that, given the company's energy exposure, asset quality could worsen over the next two years to a level not commensurate with the company's historically excellent credit performance. S&P said, "We also expect that Cullen's earnings may be hurt by higher loan loss provisions, although its preprovision earnings capacity will likely remain commensurate with peers'. We also anticipate that the company will continue to benefit from its good core deposit funding and good balance sheet liquidity over the next two years." "We could lower the ratings if nonaccruals or net charge-offs rise sharply, potentially from the energy or broader loan portfolio. We could also lower the rating if we believe that earnings will be hurt significantly over a sustained period or if we forecast its risk-adjusted capital ratio will decline and remain sustainably below 10%." "We could revise the outlook to stable if we believe that net loan losses will not be substantial and if the economic environment rebounds so that we are more confident that Cullen's asset quality, earnings, and capital will remain solid and consistent with similarly rated peers." Hancock Whitney Corp. Rationale S&P said, "The outlook revision on our ratings on Hancock Whitney Corp. (HWC) reflects our view that the company could face weakening asset quality and higher provisions given current volatile market conditions within the energy industry, as well as its exposure to Texas and southern Louisiana, which have a high reliance on tourism, energy, and other industries more vulnerable to the economic fallout resulting from the COVID-19 pandemic. Moreover, we believe HWC, like other regional bank peers, could face earnings pressures in the next year given the recent steep Fed rate cuts." "Our ratings recognize the significant decline in HWC's direct exposure to the energy industry, with its energy portfolio representing 4.5% of total loans at year-end 2019, compared with 12.4% at year-end 2014. In addition, the mix of this portfolio shifted over this time, with drilling and nondrilling support comprising 52% of energy loans, reserve-based lending 35%, and midstream 13% at year-end 2019. As an offset, we expect the company will maintain its S&P Global Ratings' risk-adjusted capital ratio in the upper end of the 7%-10% range we deem adequate, and maintain its other capital measures at solid levels, with tangible capital remaining at least 8% of tangible assets. In addition, we believe HWC's good core funding and healthy liquidity will continue to sustain it through likely volatile economic conditions over the next year. However, if asset quality or earnings weaken significantly, we could lower our ratings on HWC." Outlook S&P Global Ratings' negative outlook on HWC reflects the possibility that its asset quality could worsen given its exposure to energy loans and to broader geographies, such as southern Louisiana and Texas, that the downturn in energy markets and the COVID-19 pandemic could particularly affect. S&P said, "In addition, we believe HWC could see earnings pressure as a result of the recent steep drop in interest rates and higher provisions for loan losses. We could lower the ratings over the next two years if we expect a substantial increase in nonperforming assets or net charge-offs, potentially from the energy portfolio or broader loan portfolio, or if we believe that earnings will be hurt over a sustained period." Alternately, S&P could revise the outlook to stable if it believes that net loan losses will remain manageable and if the economic environment rebounds so that it is more confident that HWC's earnings will remain in line with similarly rated peers. Zions Bancorporation N.A. Rationale S&P said, "The outlook revision on our long-term rating on Zions Bancorporation N.A. primarily reflects the company's large loan exposure to the energy sector, which will likely be hurt by the recent sharp drop in oil prices, which may remain low for an extended period. In addition, we think overall loan performance could also be hurt by weaker U.S. economic growth resulting from the COVID-19 pandemic, particularly among its commercial borrowers. More specifically, Zions' exposure to energy loans of nearly 5% of total loans and construction loans of roughly 6% of total loans could see elevated credit deterioration given the current economic slowdown." "In addition, we think loans to energy services borrowers, which we think are more vulnerable to losses, are a somewhat higher proportion of the company's total energy loan portfolio than at other regional banks. Despite hedging activities among energy borrowers, we think classified and criticized assets will rise if oil prices do not rebound materially. We also expect the company's net interest margin to decline throughout 2020 given recent Fed rate cuts and lower market interest rates. Nonetheless, Zions' business position, earnings capacity, capital ratios, funding, and liquidity are solid, having improved over the past decade." Outlook S&P said, "The negative outlook on Zions reflects S&P Global Ratings' view that we could lower the rating given potential deterioration in loan performance amid low energy prices and a weakening economy, as well as net interest margin pressures. The negative outlook also reflects the possibility that capital ratios could decline to levels that we view as adequate from levels that we currently view as strong." "We could lower the rating over the next two years if loan performance deteriorates substantially relative to peers, either due to persistent weakness in energy or degradation in the company's construction loan exposures as a result of a broader economic slowdown. We could also lower the rating if the company materially reduces its capital ratios. Conversely, we could revise the outlook to stable if the company does not experience a significant deterioration in its loan performance, reduces higher risk loan exposures, and maintains stable financial performance, consistent with similarly rated peers." Ratings List Ratings Affirmed; Outlook Action To From BOK Financial Corp. Issuer Credit Rating BBB+/Negative/-- BBB+/Stable/-- BOKF N.A. Issuer Credit Rating A-/Negative/A-2 A-/Stable/A-2 Cadence Bancorporation Issuer Credit Rating BB+/Negative/-- BB+/Stable/-- Cadence Bank N.A. Issuer Credit Rating BBB-/Negative/-- BBB-/Stable/-- Comerica Inc. Issuer Credit Rating BBB+/Negative/A-2 BBB+/Stable/A-2 Comerica Bank Issuer Credit Rating A-/Negative/A-2 A-/Stable/A-2 Cullen/Frost Bankers Inc. Issuer Credit Rating A-/Negative/-- A-/Stable/-- Frost Bank Issuer Credit Rating A/Negative/A-1 A/Stable/A-1 Hancock Whitney Corp. Issuer Credit Rating BBB/Negative/-- BBB/Stable/-- Hancock Whitney Bank Issuer Credit Rating BBB+/Negative/-- BBB+/Stable/-- Zions Bancorporation N.A. Issuer Credit Rating BBB+/Negative/-- BBB+/Stable/-- CAPRI HOLDINGS: Fitch Lowers LongTerm IDR to BB+, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has downgraded Capri Holdings Limited's ratings, including its long-term Issuer Default Rating, to 'BB+' from 'BBB-' and its unsecured credit facility and debt rating to 'BB+'/'RR4' from 'BBB-'. The Outlook is Negative. The downgrade and Negative Outlook reflect a significant business interruption from the coronavirus pandemic, and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage (adjusted debt/EBITDAR, capitalizing leases at 8x) to around 6x in fiscal 2021 (ending March 2021), from a high 3x range in fiscal 2019 and previously expected in fiscal 2020 (prior to the coronavirus outbreak, which impacts Capri's 4Q results) based on EBITDA declining to around $500 million from approximately $1.2 billion in 2018. Revenue in fiscal 2021 could be down as much as 25% from $6 billion pro forma for the Versace acquisition. Adjusted leverage could decline to the mid-3x range in fiscal 2022, assuming sales declines of 10% and EBITDA declines of 15% from pro forma levels following the Versace acquisition. This fiscal 2022 leverage range assumes Capri uses FCF, which Fitch expects to total approximately $1 billion in fiscal years 2021-2022, toward debt reduction; adjusted leverage could be closer to 4x absent debt reduction. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Capri has sufficient liquidity to manage operations through this downturn. The company indicated it expects to end March 2020 with $800 million in liquidity, including approximately $500 million in cash and $300 million in revolver availability. Following a partial extension of its term loan maturity to 2023, Capri has $48 million of term loans due in December 2020; its next maturities are its revolver and $267 million of term loans due in late 2023. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues to the global consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retailer stores and restaurants in "non-essential" categories severely depresses sales. Numerous unknowns remain, including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved; and economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch envisages a scenario where discretionary retailers (in the U.S.) are essentially closed through mid-May, with sales expected to be down 80% to 90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid-to-high single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expects that total 2021 sales could remain 8% to 10% below 2019 levels. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, yielding 2022 as a growth year. Assuming this scenario, Fitch expects Capri's revenue to decline around 25% in calendar 2020, with EBITDA declines approaching 60%. These declines are relative to Capri's pro forma revenue and EBITDA of $6 billion and $1.3 billion, respectively, following the December 2018 Versace acquisition. In fiscal 2022, relative to these pro forma levels, Fitch expects revenue and EBITDA to decline around 10% and 15%, respectively, relative to fiscal 2020, with EBITDA supported by margin expansion at the Versace business. Capri has announced temporary store closures and extended the maturity on a $267 million portion of its $315 million term to December 2023; the remaining $48 million continues to be due in December 2020. The company also indicated it expects to end March 2020 with $800 million in liquidity, including $500 million in cash and $300 million in revolver availability. Fitch estimates that FCF, which was approximately $500 million in fiscal 2019, could decline toward $300 million in fiscal 2021, as EBITDA declines are mitigated by lower cash taxes and a negative working capital swing in 2018. Proactive reductions to capex (with a baseline of around $250 million projected in 2019) would also be anticipated. Topline Challenges at Michael Kors: The Michael Kors brand has exhibited volatile operating trends over the past four to five years, following a strong history of growth. A weakening topline trajectory and increased investments to stabilize results have led to consolidated EBITDA trending in the $1.1 billion to $1.2 billion range beginning in fiscal 2017, from a $1.4 billion peak in fiscal years 2015 and 2016. Fitch views the company's operating challenges as somewhat macro-driven, as Michael Kors has been impacted by the same challenges facing many mall-based fashion-oriented retailers. These headwinds include reduced interest in fashion leading to divergence of discretionary spending to experiences such as travel and entertainment, and increased industry markdown levels needed to prompt consumer action and clear inventory. Beyond industry pressures, striking similarities exist between the current operating trajectory at Michael Kors and several years of operational challenges at Tapestry Inc.'s (BB/Negative) Coach brand. Fitch believes both companies historically drove revenue, in part, from increased promotional activity across various channels. This activity trained existing customers to expect further markdowns and also exposed both companies to new, more value-driven customers that incorporate promotional "calls to action" in their purchasing decisions. The promotional activity also exposed Michael Kors to a new tier of competitors, prompting the company to engage in competitive activity that somewhat disrupted its ability to maintain a planned promotional cadence. Following the significant hit to sales in fiscal years 2015 through 2017 from reduced promotional activity, Coach has been able to stabilize results through a renewed focus on product design, store remodels, store closures and a pullback in department store exposure. Similarly, Michael Kors reduced its retail promotional activity significantly in fiscal 2018. The company has also reduced its sell-in to department stores and participation in department store-wide promotional events. In fiscal 2019, the brand saw positive results in Europe and Asia, yet also faced continued challenges in the Americas. To generate growth, the company has an ongoing remodel program across stores to drive excitement, and is increasing both square footage allocation and wholesale focus toward less-penetrated categories, e.g. women's footwear and ready-to-wear items, along with men's apparel and accessories. The company is also increasing investment in digital capabilities to support an omni-channel presence across stores and ecommerce, in line with changes to consumer shopping patterns. The company also closed approximately 100 Michael Kors stores in fiscal 2019 and plans to close an additional 50 stores in fiscal 2020 as part of their fleet optimization plan. Fitch somewhat attributes the brand's fiscal 1Q20-3Q20 revenue declines to a strategic decision to reduce wholesale shipments, as it limits reliance on third-party retailers like department stores to sell its product. Foreign currency is also impacting the topline trajectory by about minus 1%. After posting positive low single-digit comparable store sales (comps) in 2Q20, the company reported 3Q20 comps in the negative single digits, in line with a trend of largely negative results over the past three to four years. Acquisitive Nature: Capri has evolved from a Michael Kors-focused company to a portfolio of high-end fashion and accessory brands through acquisitions. This evolution has benefited Capri's credit profile through diversification across many fronts, including brand reliance, geography, product category and gender exposure. In November 2017, the company purchased luxury shoe and accessory maker Jimmy Choo PLC for $1.35 billion, or 16.5x EV/EBITDA (based on Fitch-defined EBITDA for the 12-month period ending June 30, 2017). The acquisition price was approximately 40% above the company's market capitalization prior to the April 2017 announcement by majority owner JAB that the asset was for sale. Jimmy Choo, which currently operates 216 stores and a wholesale business focusing on high-end department stores and retailers, reported a 12% revenue CAGR over five years prior to the acquisition, attributable to increased brand acceptance in the luxury shoe and related accessories space. Jimmy Choo's business mix is primarily shoes (75%), with the remainder comprising accessories and apparel. The company intends to eventually have accessories reach 50% of the business. The brand mostly sells products for women, with a very limited men's assortment. Around 75% of revenue is generated outside the Americas, compared with around 30% for Michael Kors. Capri Holdings financed the purchase of Jimmy Choo with $1 billion of unsecured term loans and $450 million in unsecured notes. The $1 billion in unsecured term loans has since been paid off. On Dec. 31 2018, Capri completed its second major acquisition when it purchased Gianni Versace S.p.A., an independently operated luxury goods company, for $2 billion (valuation unavailable given a lack of financial information on the asset). Like Jimmy Choo, Versace provides some diversification opportunities across product categories, geographies and segments. Versace is more heavily skewed toward apparel, international markets (only 20% of sales are in the Americas) and men's products, compared with Michael Kors' focus on accessories, the Americas and women's products. Capri intends to grow Versace to $2 billion in revenues by focusing on Versace's first line, building out the brand's retail footprint, increasing e-commerce capabilities and expanding women's accessories and footwear penetration to 50% of revenues. Donatella Versace, the founder's sister, heads the company's design team. Capri Holdings partially financed the purchase of Versace with $1.6 billion in unsecured term loans. As of Dec. 28, 2019, $1.125 billion remained outstanding on the term loan facility. DERIVATION SUMMARY Capri's downgrade to 'BB+' and Negative Outlook reflect the significant business interruption caused by the global reach of the coronavirus and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around 6x in fiscal 2021 (ending March 2021), from a high 3x range in fiscal 2019 and previously expected in fiscal 2020 (prior to the coronavirus outbreak, which impacts Capri's 4Q results), based on EBITDA declining to around $500 million in fiscal 2021 from about $1.2 billion in fiscal 2019. Revenue in fiscal 2021 could be down as much as 25% from $6 billion pro forma for the Versace acquisition. Adjusted leverage could decline to the mid-3x range in fiscal 2022, assuming sales declines of 10% and EBITDA declines of 15% from pro forma levels following the Versace acquisition. This fiscal 2022 leverage range assumes Capri uses FCF, which Fitch expects to total about $1 billion in fiscal years 2021 and 2022, toward debt reduction; adjusted leverage could be closer to 4x absent debt reduction. The rating continues to reflect the company's longer-term growth trajectory and its strong U.S. positioning and global presence in the handbag and small leather goods market. The rating also considers the fashion risk inherent in the accessory and apparel space, illustrated by the Michael Kors brand's topline weakness in recent years. Fitch recognizes Capri's financial policy of targeting a 2.0x to 2.25x leverage range (capitalizing rent at 6x; the Fitch-adjusted equivalent is 2.5x to 2.75x), supporting Fitch's view that the company could continue to prioritize debt reduction even given the challenging operating environment. Similarly rated apparel and accessories peers include Burlington Stores, Inc. (BB+/Negative), Tapestry, Inc. (BB/Negative) and Levi Strauss & Co. (BB/Negative). Burlington's rating reflects a good growth trajectory in both top line and EBITDA given a favorable backdrop of growth in the off-price channel and strong execution. Ratings for Tapestry reflect its strong U.S positioning and global presence in the handbag and leather goods categories, while Levi's ratings reflect a strong global denim positioning. Like Capri, operations for Tapestry and Levi are dominated by a single brand, which somewhat limits diversification and heightens fashion risk. Both Capri and Tapestry have made leveraging acquisitions in recent years, with somewhat disappointing subsequent performance on continued sluggishness for Capri's Michael Kors brand and a difficult turnaround for Tapestry's acquired Kate Spade brand, respectively. Ratings and negative outlooks for each of these players reflect projected consumer discretionary spending concerns through 2021, triggered in part by the coronavirus pandemic. By the end of 2021, adjusted debt/EBITDAR could trend to around 4x for Burlington, Tapestry and Levi. KEY ASSUMPTIONS Fitch's Key Assumptions Within the Rating Case for the Issuer: Here are Fitch's projections prior to disruption related to the global reach of the coronavirus: -- Fitch projected Capri would generate fiscal 2020 revenue of around $5.7 billion, below pro forma levels of $6.0 billion following the Versace acquisition, on declines in Michael Kors' wholesale sales and negative foreign currency. Fitch projected low single-digit growth beginning in fiscal 2021, reflective of modestly positive growth at Michael Kors and faster growth at Jimmy Choo and Versace. Revenue was projected to return to pro forma levels by fiscal 2023. -- EBITDA in fiscal 2020 was projected at around $1.2 billion, below the $1.3 billion pro forma, level on topline declines. Growth beginning fiscal 2021 was forecast to generally follow revenue, with expansion toward $1.3 billion in fiscal 2023. -- FCF was projected at around $600 million in fiscal 2020, improving toward $800 million over the next three years on EBITDA growth and lower cash restructuring charges. Fitch expected Capri to use FCF to reduce debt. Adjusted debt/EBITDAR, which was 3.8x in fiscal 2019, was expected to trend toward 3.0x by fiscal 2023, largely on debt reduction. Here are Fitch's revised projections reflecting a significant business interruption from the global reach of the coronavirus and the ramifications of a likely downturn in discretionary spending extending well into 2021: -- Fitch projects Capri's fiscal 2020 (ending March 2020) revenue could be in the $5.3 billion range, with the company's 4Q impacted by store closures in China for much of the quarter and, more recently, closures in other territories including the U.S. EBITDA in fiscal 2021 is projected to be around $900 million. Capri's fiscal 2021 revenue could decline 15% to 20% to around $4.4 billion, and EBITDA could decline around 40% to the $500 million range, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. Given Capri's fiscal calendar, the company's YOY trends should meaningfully reverse in 4Q fiscal 2021 as Capri laps the onset of global store closures. -- While fiscal 2022 revenue and EBITDA should significantly rebound from depressed fiscal 2021 levels, Fitch expects fiscal 2022 revenue of approximately $5.5 billion and EBITDA of around $1.1 billion to be approximately 10% and 15% below pro forma levels following the Versace acquisition, respectively. Fitch's revenue expectations reflect its views that global retail discretionary spending will decline around 40% in the first half of calendar 2020 and in the mid- to high-single digits (percentage-wise) in the second half of 2020. Sales in calendar 2021 are projected to be down 8% to 10% from 2019 levels. -- Beginning in fiscal 2023, Capri could resume low single-digit growth, predicated on modest growth at Michael Kors and mid-single-digit growth at Jimmy Choo and Versace. -- FCF in fiscal 2021 could moderate to around $350 million from around $630 million projected in fiscal 2020, largely due to a $400 million reduction in EBITDA, mitigated by lower cash taxes and assuming some proactive cuts to capex. FCF in fiscal 2022 could improve to above $700 million. Capri does not pay a dividend and could use FCF toward debt reduction. The company has $48 million of term loans due in December 2020, with no subsequent maturities until late 2023. -- Adjusted debt/EBITDAR, which was 3.8x in fiscal 2019, could climb toward 6.0x in fiscal 2021 before declining to the mid-3x range in fiscal 2022 on EBITDA swings. These leverage forecasts assume Capri uses FCF to reduce debt; fiscal 2022 adjusted leverage without debt reduction could be around 4.0x. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to a Positive Rating Action: -- An upgrade could occur from sales and EBITDA growth that, when combined with debt reduction, yields total adjusted debt/EBITDAR (capitalizing rent at 8x) sustaining in the low-3x range. -- Fitch could stabilize Capri's Outlook if confidence improves in the company's ability to stabilize operations while reducing debt such that adjusted debt/EBITDAR in the high-3x range is sustained. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A negative rating action could result from an inability to stabilize EBITDA in projected fiscal 2021 levels, which could cause adjusted debt/EBITDAR (capitalizing rent at 8x) to sustain above the high-3x range. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE As of Dec. 28, 2019, the company reported $237 million in cash and $503 million borrowed on its $1 billion Revolving Credit Facility. After accounting for letters of credit outstanding, the amount available on the revolving credit facility was $481 million. The company's debt structure as of Dec. 28, 2019 includes $1.13 billion outstanding on its 2018 Term Loan Facility as well as $450 million in senior notes due 2024. On March 20, 2020, the company amended its Credit Agreement extending the maturity of $267 million of its Term Loan A-1 facility from November 2020 to November 2023. The remaining $48 million of this facility will be due by November 15, 2020. Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. Fitch assigned a 'BB+'/'RR4' to Capri's unsecured revolving credit facility and unsecured term loans and notes, indicating average recovery prospects (31% to 50%). SUMMARY OF FINANCIAL ADJUSTMENTS -- Historical and projected EBITDA is adjusted to add back non-cash stock-based compensation and exclude any one-time charges. For example, in fiscal 2019 (ended March 31, 2019), Fitch added back $60 million in non-cash stock-based compensation to its EBITDA calculation; -- Fitch has adjusted the historical and projected debt by adding 8x yearly operating lease expense. CAROLINA INTEGRATIVE: U.S. Trustee Unable to Appoint Committee -------------------------------------------------------------- The Office of the U.S. Trustee on March 31 disclosed in a court filing that no official committee of unsecured creditors has been appointed in the Chapter 11 case of Carolina Integrative Medicine, P.A. About Carolina Integrative Medicine Carolina Integrative Medicine, P.A., filed a Chapter 11 bankruptcy petition (Bankr. D.S.C. Case No. 20-01227) on March 6, 2020, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Robert H. Cooper, Esq., at The Cooper Law Firm. CBL & ASSOCIATES: Fitch Lowers LT Issuer Default Rating to CC ------------------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDRs) of CBL & Associates Properties, Inc. and its operating partnership, CBL & Associates, L.P., to 'CC' from 'CCC+'. The 'CC' IDRs reflect Fitch's expectation that an event of default or an exchange/restructuring of existing debt is probable within 12 months. CBL's deteriorating operating performance, specifically negative same-store NOI, and a weak liquidity position, including limited capital access, have resulted in minimal headroom for the company's credit profile to navigate coronavirus-related retailer tenant stress. The company has drawn substantially all of its remaining revolver capacity. Fitch expects property-level fundamentals will remain pressured by store closures and bankruptcies of weaker performing retailers, exacerbated by the current social distancing and wide spread retailer closures, which will challenge the company's ability to sustain portfolio and financial metrics. Fitch believes the current coronavirus-related fallout will accelerate deterioration in performance of struggling retailers and lower quality mall assets, increasing the rate of store closures and bankruptcy activity and potentially triggering additional co-tenancy clauses. Notably, the company's credit facility considers the delisting of its common equity as an Event of Default. The company will be seeking to execute a reverse stock split at its April 2020 Annual Meeting to remedy its sub-$1 share price. Investor sentiment regarding retail real estate, specifically low- to mid-tier mall assets, has been negative and Fitch anticipates this will persist. KEY RATING DRIVERS Cash Flow Erosion: Fitch expects CBL's operating metrics will deteriorate further in the near term. The company's original FY20 guidance called for same-center NOI declines of -9.5% to -8.0%, prior to accounting for coronavirus-related impacts including further foot traffic dissipation due to social distancing and accelerated store closures and bankruptcy events for struggling retailers. CBL has since withdrawn its public guidance citing uncertainty related to the coronavirus. Operating performance has been affected most significantly by ongoing department store anchor weakness (i.e. JC Penney, Macy's) and related co-tenancy clauses in combination with store closures and bankruptcies of material in-line tenants (i.e. Victoria's Secret, Foot Locker, Forever 21, etc.). Rent concessions, growing tenant improvement costs and shorter lease terms characterize CBL's leasing activity in the last several quarters. Conditional Capital Access: CBL's access to capital has been limited to its secured credit facility and refinancing of secured mortgage maturities has required lender leniency in many cases. CBL has no tangible access to the unsecured bond market or public/preferred equity markets. The company does have some runway prior to its next unsecured bond maturity in 2023, but Fitch anticipates the company's operating performance deterioration will necessitate a debt restructuring before that scheduled maturity. Weak UA/UD: CBL encumbered many of its best-performing assets when collateralizing its secured credit facility in January 2019, diluting the quality and amount of unencumbered asset coverage of unsecured debt. Secured financing available for less productive malls has weakened materially, limiting the contingent liquidity provided by the company's remaining unencumbered pool. Secured mortgage lenders, including CMBS, have tightened class B mall underwriting standards to generally require tenant productivity above $400 psf, compared with CBL's $312 psf weighted average for its unencumbered pool at Dec. 31, 2019. Fitch's estimate of unencumbered asset coverage of unsecured debt (UA/UD) was approximately 0.6x when applying a stressed 17.0% capitalization rate to 4Q19 annualized unencumbered NOI. Recovery Ratings: Fitch's recovery analysis assumes CBL would be considered a going-concern in bankruptcy and the company would be reorganized rather than liquidated. Fitch applies individual stressed capitalization rates, based on the addition of 50bps to prevailing market cap rates, to the 4Q19 NOI generated by each tier of mall asset as well as the associated and community center assets to determine a weighted average stressed capitalization rate of 13.3%. The stressed cap rates applied to each asset tier are as follows: Tier I malls 10.7%, Tier II malls 14.5%, Tier III malls 20.4% and Other Centers 9.0%. 4Q19 annualized NOI of $507 million is discounted by 10.9%, based on Fitch's estimated FY20 SSNOI decline, reflecting approximately 200bps additional stress to the midpoint of the company's original full-year guidance range of -9.5% to -8.0%. This discounted figure is added to forecast 6% redevelopment yields on approximately $185 million of redevelopment activity. The weighted average stressed cap rate of 13.3% is applied to the post-reorganization NOI of $463 million to determine a recoverable value for the real estate portfolio. The recoverable real estate value is combined with a discounted valuation of non-real estate assets to determine a net recoverable value available to holders of CBL's obligations of $3.3 billion, after applying 10% to administrative costs and priority claims. There is no assumption of concession allocation to unsecured claims due to expected recoveries on the unsecured bonds in the 31%-50% range. The distribution of value yields a recovery ranked in the 'RR1' category for the senior secured revolver and term loan based on Fitch's expectation of recoveries for the facility in the 91%-100% range, the 'RR4' category for the senior unsecured bonds based on recoveries in the 31%-50% range, and the 'RR6' category for the preferred stock based on recoveries in the 0%-10% range. The credit facility is secured by a first-priority lien on several of CBL's Tier I assets, its most productive as measured by tenant sales per sf. Fitch assumes that CBL draws the full amount available under its $685 million revolving credit facility and includes that amount in the claims waterfall. Fitch also assumes that all $1.4 billion in outstanding first-lien mortgages are fully repaid via the recoverable value in a going concern scenario. Fitch includes $42 million in recourse loans on operating properties and $130 million in guarantees on unconsolidated joint venture mortgages, construction loans, leases and its performance bonds in the waterfall and considers them structurally senior to CBL's unsecured bonds. Under Fitch's Recovery criteria, these recoveries result in notching three levels above the IDR for the credit facility to 'CCC+', notching level with the IDR for the unsecured bonds to 'CC', and notching one level below the IDR to 'C' for the preferred stock. The recoveries of CBL's unsecured bonds are approximately $47 million higher than Fitch's December 2019 recovery analysis, reflecting lower asset-level obligations outstanding due to deed-in-lieu transactions and repayment of maturing mortgages via the secured revolver, which was already assumed fully drawn under Fitch's recovery assumptions. DERIVATION SUMMARY CBL's relative levels of occupancy, SSNOI growth, leasing spreads and tenant sales productivity are weaker than 'B'-mall peer Washington Prime Group (WPG; B/Negative) and considerably weaker than 'A'-mall peer Simon Property Group (SPG; A/Negative). CBL's leverage in the mid-7x to low-8x range is similar to WPG's, but significantly higher than SPG's which has sustained through-the-cycle leverage in the low-5x range. Further, CBL's contingent liquidity, as measured by UA/UD, is estimated at 0.6x and exhibits high levels of adverse selection. Fitch estimates WPG's UA/UD at approximately 1x, and SPG's UA/UD, pro forma for the Taubman acquisition, is estimated in the mid-2x range. In addition, CBL's capital access is materially weaker than its peers and severely limits its financial flexibility. WPG has exhibited moderately better access to the secured mortgage markets as its assets are generally more productive than CBL's based on sales per sf. SPG has exhibited market-leading access through-the-cycle to both the bond and equity markets. KEY ASSUMPTIONS -- Negative 10.9% SSNOI growth in FY20, reflecting approximately 200bps in additional stress on the company's original FY20 SSNOI guidance range of -9.5% to -8.0%; -- Recurring capital expenditures of $75 million in FY20; -- Development/redevelopment spend of $125 million in FY20. The weighted average initial yield on cost for projects coming online is approximately 6%, which is below the company's historical returns on development/redevelopment; -- Total non-core asset sales of ~$50 million in FY20 RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Sustained improvement in equity pricing thereby mitigating the risk of delisting and an EOD under the credit facility; -- Significant reduction in refinancing risk with improved liquidity. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A default or the start of a default-like process. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Fitch estimates CBL's liquidity sources are insufficient to cover its uses through FY21. The company has drawn substantially all of its remaining revolver capacity and cash flow deterioration continues to pressure the company's remaining operating cash retention. Fitch defines liquidity coverage as sources of liquidity divided by uses of liquidity. Sources include unrestricted cash, availability under secured revolving credit facilities, and retained cash flow from operating activities after dividends. Uses include pro rate debt maturities, expected recurring capital expenditures and expected (re)development costs. ESG Considerations ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). CENTENNIAL RESOURCE: S&P Lowers ICR to 'CCC+'; Outlook Negative --------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on expect U.S.-based oil and gas exploration and production company Centennial Resource Development Inc. (CDEV) to 'CCC+' from 'B+'. The outlook is negative. The recent dive in commodity prices will damage Centennial's leverage metrics and profitability. S&P expects CDEV's credit measures to weaken considerably in the current environment, with funds from operations (FFO) to debt deteriorating to around 18% and debt to EBITDA just below 6x. CDEV is especially susceptible to swings in oil prices because it has essentially no favorably priced hedging in place. The negative outlook reflects S&P's expectation that CDEV's credit measures will be weak over the next two years because of low commodity prices. CDEV has little hedging in place at favorable prices, which leaves it especially susceptible to negative oil price shocks. S&P expects CDEV to significantly outspend cash flows over the next year even though it sharply cut capital spending. Furthermore, given the price environment, Centennial is at risk of breaching the leverage covenant associated with its revolving credit facility. "We could lower the rating on CDEV if it breaches the 4x total-funded-debt-to-EBITDAX leverage covenant associated with its revolving credit facility or if we believe the company cannot meet its financial commitments," S&P said. "We could raise the rating on CDEV if we believe the company could safely remain in compliance with all of its covenants and financial commitments. This would most likely occur if commodity prices materially improve over the next two years," S&P said. CINEMARK USA: Moody's Alters Outlook on B1 CFR to Negative ---------------------------------------------------------- Moody's Investors Service has affirmed Cinemark USA, Inc.'s B1 Corporate Family Rating, B1-PD Probability of Default Rating, Ba1 ratings on the company's bank credit facilities (consisting of a $100 million revolving credit facility and $646.3 million outstanding senior secured term loan) and B2 ratings on its $1.16 billion of senior unsecured notes. The Speculative Grade Liquidity Rating was downgraded to SGL-2 from SGL-1. Cinemark USA's outlook was revised to negative from stable. As a wholly-owned subsidiary of Cinemark Holdings, Inc., Cinemark USA's ratings derive support from its parent. RATINGS RATIONALE The ratings affirmation reflects Cinemark's solid debt protection measures for the B1 rating category and ample liquidity at the onset of the coronavirus crisis. The rating is supported by governance considerations, specifically a conservative leverage policy that targets debt to EBITDA in the mid-3x range and Moody's expectation that the company will improve EBITDA over the next two years looking beyond the current downcycle. At December 31, 2019, the company's financial leverage as measured by total debt to EBITDA was 3.4x (Moody's adjusted), cash balances totaled $488 million and LTM free cash flow generation was just under $100 million. Cinemark recently drew down nearly all of its revolver's available capacity to further boost cash levels during this period of economic uncertainty. Existing liquidity sources combined with meaningful cost cutting measures that Moody's expects Cinemark to undertake should enable the company to absorb negative operating cash flows through the first half of 2020 and produce offsetting positive free cash flow in the back half of 2020 to facilitate modest positive free cash flow generation this year. The negative outlook reflects Moody's expectation for lower revenue and EBITDA this year coupled with weakened liquidity as a result of temporary closures of Cinemark's theatre circuit in the US (345 theatres) and Latin America (209 theatres) (based on the company's 2019 10K filing) [1]. On 17 March, Cinemark announced it will close all of its US theatres to adhere to the federal government's recommendation that public gatherings should be restricted to ten or fewer individuals and engage in social distancing and as stay-at-home practices due to the widespread coronavirus pandemic (a.k.a., COVID-19) [2]. Similar mandates have been enacted by national governments across Latin America, which have led to theatre closures in Argentina, Brazil, Colombia and other regions where Cinemark operates. Moody's expects the closures to last up to three months, similar to other movie exhibitors. While Moody's expects leverage to rise in 2020 to the 5x range (Moody's adjusted) due to lower EBITDA, as the virus threat is neutralized, theatres reopen and EBITDA expands with moviegoers gradually returning to the cinema for what is expected to be a relatively strong movie slate next year, it projects leverage will subsequently decline to the mid-3x area and free cash flow generation will be positive in 2021. The negative outlook also reflects the numerous uncertainties related to the social considerations and economic impact from COVID-19 on Cinemark's cash flows and liquidity if the virus continues to spread forcing Cinemark to keep its theatres closed beyond June and government financial aid programs for the theatre industry are delayed. Under this scenario, the ratings could be downgraded if Moody's expects that Cinemark will exhaust its existing liquidity sources, the company is unable to access additional lines of credit and/or the headroom under its springing financial covenant decreases due to revolver usage combined with higher-than-expected EBITDA shortfalls. As the third largest movie exhibitor in the US, Cinemark's balance sheet is less levered than its cinema operator peers. Unlike its rivals, Cinemark has not pursued sizable debt-financed acquisitions over the last several years. As a result, the company's debt quantum and leverage have remained relatively steady. Additionally, Cinemark has consistently generated positive annual free cash flow given the manageable interest expense burden. Operating performance has been somewhat challenged by a mature North American box office as a result of weakening moviegoer attendance and volatility in several Latin American markets. As this global coronavirus crisis unfolds, Cinemark benefits from lack of exposure to Europe, which has experienced extensive infections with several countries under nationwide or partial lockdown. In Latin America (21% of Cinemark's total revenue based on the company's 2019 10K filing) [1], the virus has spread at a slower pace compared to the US and Europe, though cases have recently risen sharply in Brazil, Chile and Ecuador. In the US, Cinemark has theatre locations across 42 US states. Of the three states with the highest caseloads - New York, California and Washington - the company has a sizable footprint only in California with 66 theatres based on Cinemark's 2019 10K filing [1]. Like most cinema operators, Cinemark has a highly variable cost structure and can quickly reduce operating costs by up to 75% in the short-run. Moody's fully expects the company to implement plans to minimize its cash burn as much as possible during the closure period via a combination of natural expense reductions (i.e., costs not incurred while theatres are closed) and management actions aimed at reductions in maintenance, utilities, payroll and theatre-level operating costs. With respect to the fixed rent costs for its theatres, Moody's expects Cinemark will likely seek to obtain cash relief or rent deferrals during the closure period and beyond, if necessary. In the US, the National Association of Theatre Owners (NATO) supported legislation that was recently enacted to provide emergency financial assistance to the movie theatre industry [3]. The aid package is designed to relieve the ongoing cost burden during the closure period, give tax benefits to assist employers with support to employees and offer government loan guarantees to help ease the liquidity squeeze. Even before the coronavirus outbreak forced Cinemark to shut its theatres, the company had planned to reduce operating costs this year by $40 million via operational and process improvements to expand margins. In view of the theatre closures, Moody's expects Cinemark to reduce its net capex this year from the originally planned $300 million and potentially suspend the dividend to help preserve cash and reduce cash outlays. Given the possibility of its theatres remaining closed for up to three months, Moody's expects the lack of revenue generation, combined with the ongoing need to pay certain fixed expenses and debt-servicing costs, will weaken Cinemark's liquidity. Nonetheless, during this three-month period, Moody's expects the company's sizable cash balances to cover the near-term cash burn. To the extent Cinemark is able to reopen its theatres by mid-June and patrons gradually return to its cinemas, the company in conjunction with the major film studios could offer promotions plus early releases and re-releases of certain premium movies to stimulate moviegoer demand, especially during the summer months when Cinemark typically experiences a seasonally strong box office. Under this scenario, Moody's projects the company will generate sufficient positive free cash flow in H2 2020 to offset negative free cash flow in H1 2020 to produce positive free cash flow this year. The primary risk to Cinemark over the short-run would be a prolonged outbreak, causing its theatres to remain closed for an extended period beyond June coupled with an exhaustion of its existing sources of liquidity and an inability to timely access new liquidity sources to cover the cash burn into Q3 2020. The US emergency economic relief package for cinema operators that was recently signed into law could improve Cinemark's ability to access additional credit lines from its banks, if this becomes necessary. Further, Cinemark has a sizable portfolio of unencumbered theatre assets that could potentially be monetized to bolster its liquidity. The secondary risk is a potential decline in headroom under the revolver's springing covenant. Following the company's recent $98.8 million draw down, the net senior secured leverage covenant was triggered and headroom could decrease rapidly when combined with a considerable decline in EBITDA and cash balances. While the company was in compliance with the covenant at December 31, 2019, Moody's will closely monitor Cinemark's headroom over the coming quarters. Moody's does not expect a covenant breach to occur. However, if the covenant cushion were to tighten materially, Moody's expects the company would proactively seek to obtain covenant relief from its banks. To the extent Cinemark's theatres reopen by mid-June, Moody's does not expect attendance to be strong in the second half of the year given that 2020 was already expected to be a weak year for big budget tentpole film debuts and movie studios have: (i) postponed releases of several films by pulling them off the spring and summer calendars due to the outbreak and pushing their releases later into 2020 or 2021; (ii) opted to simultaneously debut new films direct-to-consumer on subscription video on demand (SVOD) streaming platforms; or (iii) released movies earlier-than-normal to streaming platforms. Further, Moody's expects some consumers will be hesitant to visit theatres even after the outbreak has subsided while some moviegoers will reduce their out-of-home entertainment activities and instead watch high quality movies at home given the growing number of providers offering premium SVOD content. The stay-at-home safety measures put in place during the COVID-19 outbreak could accelerate this type of consumer behavior and some individuals could spend more time viewing movies at home even after the disease has been contained and theatres reopen. Moviegoer demand will likely remain strong for big budget "cultural event" premium films while in-home viewing will be reserved for low or medium-budget second-tier films. Despite these challenges, Moody's expects cinema operators to remain an integral part of film studios' distribution of their movie content and a key destination for consumers seeking affordable out-of-home entertainment. ESG CONSIDERATIONS The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The movie theatre sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Cinemark's credit profile, including its exposures to the US and Latin America economies have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Cinemark remains vulnerable to the outbreak's continuing spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Cinemark of the breadth and severity of the shock, and the deterioration in credit quality it has triggered. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rating outlook could be revised to stable if Cinemark reopens its theatres sooner-than-expected, as a result of faster containment of the coronavirus, resulting in minimal impact to liquidity; or if its theatres reopened as planned after the three-month shut down, attendance revives and Cinemark returns to positive operating cash flow. Upward ratings pressure is unlikely over the coming 6-12 months, especially if the coronavirus outbreak restricts Cinemark's ability to reopen its theatres or reduces the company's profitability if overall attendance declines when theatres reopen. Over time, an upgrade could occur if the company experienced positive growth in box office attendance, stable-to-improving market share, higher EBITDA and margins, enhanced liquidity, and exhibited prudent financial policies that translate into an improved credit profile. An upgrade would also be considered if financial leverage as measured by total debt to EBITDA was sustained below 4.0x (Moody's adjusted) and free cash flow as a percentage of total debt improved to above 5% (Moody's adjusted). Downward ratings pressure could occur if there was: (i) prolonged closure of Cinemark's cinemas beyond three months leading to a longer-than-expected cash burn period, an exhaustion of the company's liquidity resources and an inability to access additional sources of liquidity to cover the higher cash outlays; (ii) poor execution on timely implementing the planned cost reductions; and (iii) limited prospects for operating performance recovery in H2 2020 and 2021. A downgrade could also be considered if total debt to EBITDA was sustained above 5.0x (Moody's adjusted) or free cash flow generation turns negative on a sustained basis. SUMMARY OF THE RATING ACTIONS Ratings Affirmed: Issuer: Cinemark USA, Inc. Corporate Family Rating, Affirmed B1 Probability of Default Rating, Affirmed B1-PD $100 Million Revolving Credit Facility due 2022, Affirmed Ba1 (LGD2) $646.3 Million Outstanding Senior Secured Term Loan B due 2025, Affirmed Ba1 (LGD2) $400 Million 5.125% Gtd. Senior Global Notes due 2022, Affirmed B2 (LGD5) $225 Million 4.875% Gtd. Global Notes due 2023, Affirmed B2 (LGD5) $530 Million 4.875% Gtd. Global Notes due 2023, Affirmed B2 (LGD5) Speculative Grade Liquidity Actions: Issuer: Cinemark USA, Inc. Speculative Grade Liquidity, Downgraded to SGL-2 from SGL-1 Outlook Actions: Issuer: Cinemark USA, Inc. Outlook, Changed to Negative from Stable Headquartered in Plano, Texas, Cinemark USA, Inc. is a wholly-owned subsidiary of Cinemark Holdings, Inc., a leading movie exhibitor that operates 554 theaters and 6,132 screens worldwide with 345 theatres and 4,645 screens in the US across 42 states and 209 theatres and 1,487 screens in Latin America across 15 countries. Revenue totaled approximately $3.3 billion for the fiscal year ended December 31, 2019. CIRQUE DU SOLEIL: S&P Lowers ICR to 'CCC-'; Outlook Negative ------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on Cirque Du Soleil Group to 'CCC-' from 'B-'. The outlook is negative. S&P also lowered the rating on the company's first-lien facility to 'CCC' from 'B' and on its second-lien term loan to 'C' from 'CCC'. In response to the social distancing measures that have been put in place to slow the spread of the coronavirus pandemic, Cirque has shut down all of its shows and will be unable to generate revenue until pandemic fears have abated enough to allow it to reopen. "We expect that the company will take all possible liquidity-preserving actions, which have already included laying off 95% of the workforce. If Cirque were unable to reopen its shows for a prolonged period of time, we believe that available liquidity sources would be insufficient to meet the company's near-term obligations. In addition to debt service, and the funding of ongoing operations and remaining payroll, the company might be obligated to refund a significant amount of deferred revenue from advanced ticket sales. Although the strictest restrictions on travel and social gatherings might be lifted in the coming weeks or months, we expect it will be some time before fears around the virus have abated enough for Cirque to resume its theatrical shows. Because Cirque does not have cash on hand that is sufficient to service its debt, pay remaining expenses, and refund advanced deposits, we estimate the company could default within the next six months. We also believe there is significant uncertainty regarding the future form and viability of Cirque and other theater-based business models, in light of the spread of COVID-19 and potentially new health standards that might apply to such businesses," S&P said. The negative outlook reflects S&P's view that the company will likely default, initiate a distressed exchange, or pursue a restructuring over the next few months. The outlook also incorporates the challenges the company may face if it reopens its shows into a U.S. recession. "We could downgrade Cirque, likely to 'D', if it missed an interest payment and we did not expect it to be paid. Alternatively, we could lower our rating on the company to 'SD' (selective default) if Cirque announced any type of debt restructuring or extension," S&P said. "We could raise the rating on Cirque if it were able to reopen its shows, sustainably generate cash flow, and have adequate liquidity," the rating agency said. COASTAL HOME: King Objects to Plan & Disclosures ------------------------------------------------ Creditor Tammy E. King objects to confirmation of Plan of Reorganization and the Disclosure Statement filed by debtor Coastal Home Care, Inc. and requests the appointment of a trustee or, alternatively, an examiner, and states: * The Debtor failed to produce documents by Oct. 17, 2019. On Oct. 22, King's counsel conferred with Debtor's counsel regarding Debtor's non-compliance with the duces tecum request and Debtor's counsel asserted the Notice was invalid because it was not filed with the Court. * Based on Debtor full payment misrepresentations, King deferred moving to compel Debtor's compliance with the Discovery Order and the 2004 Examination of Debtor’s CEO, Michael Moses. * The Debtor's Plan offers King and other unsecured creditors only 16 cents on the dollar. The Debtor's drastic change in payment position is purportedly because Moses, Debtor's CEO, was "pushed over the edge" and decided "it's not worth it" to pay creditors what they are owed despite the fiduciary duty owed by a debtor-in-possession to creditors. * The Debtor's Schedules, misrepresentations, and Plan evidence Debtor's lack of good faith to identify and recover diverted funds. * The Disclosure Statement claims the Reorganization arose from lawsuits filed by Westcoast Therapy Services and Achieve Home Care, LLC, however, the Disclosure Statement offers no explanation regarding Debtor's purported inability to pay for services rendered by these entities. * The Disclosure Statement offers no support for the proposed payment to unsecured creditors in the amount of $867 per month over a five year period. A full-text copy of the creditor's objection filed March 17, 2020, is available at https://tinyurl.com/vhnqhcx from PacerMonitor at no charge. Counsel for Creditor Tammy E. King: SHUMAKER, LOOP & KENDRICK, LLP Brian W. Schaffnit, Esq. 101 E. Kennedy Blvd., Suite 2800 Tampa, Florida 33602 Tel: (813) 229-7600 Fax: (813) 229-1660 E-mail: bschaffnit@shumaker.com mdesilles@shumaker.com About Coastal Home Care Coastal Home Care, Inc., filed a Chapter 11 bankruptcy petition (Bankr. M.D. Fla. Case No. 19-07259) on July 31, 2019, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Jake C. Blanchard, Esq., at Blanchard Law, P.A. COMER ENTERPRISES: April 29 Plan Confirmation Hearing Set --------------------------------------------------------- Debtor Comer Enterprises, Inc., filed with the U.S. Bankruptcy Court for the Eastern District of Pennsylvania a Disclosure Statement referring to a plan of reorganization under chapter 11 of the Code filed on February 14, 2020. On March 19, 2020, Judge Magdeline D. Coleman approved the Disclosure Statement and established the following dates and deadlines: * April 24, 2020, is set as the last date by which ballots must be received by counsel for the Debtor in order to be considered as acceptances or rejections of the Plan of Reorganization. * April 24, 2020 is fixed as the date to file any written objection to confirmation of the Plan of Reorganization. * April 27, 2020, is the deadline for the Debtor to file its Report of Plan Voting with the Court. * April 29, 2020, at 11:30 a.m. is the hearing on confirmation of the Plan of Reorganization which shall be held before the Honorable Magdeline D. Coleman in Courtroom No. 2, United States Bankruptcy Court, 900 Market Street, 2nd floor, Philadelphia, PA 19107. A full-text copy of the order dated March 19, 2020, is available at https://tinyurl.com/rv9l87n from PacerMonitor at no charge. Attorneys for Debtor: SMITH KANE HOLMAN, LLC 112 Moores Road, Suite 300 Malvern, PA 19355 Tel: (610) 407-7216 Fax: (610) 407-7218 About Comer Enterprises Comer Enterprises Inc. provides staffing services and specializes in identifying the right fit for a company through technology-centric and aptitude-encompassing hiring algorithms. It conducts business under the name CE Solutions. Comer Enterprises sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Pa. Case No. 19-15182) on Aug. 18, 2019. At the time of the filing, the Debtor was estimated to have assets of between $1 million and $10 million and liabilities of the same range. The case is assigned to Judge Magdeline D. Coleman. Smith Kane Holman, LLC, is the Debtor's legal counsel. CONSIS INTERNATIONAL: Fourth Amended Plan Confirmed by Judge ------------------------------------------------------------ Judge Scott M. Grossman of the U.S. Bankruptcy Court for the Southern District of Florida, Fort Lauderdale Division, has ordered that the Fourth Amended Plan of Reorganization filed by debtor Consis International LLC is confirmed. The Settlement Agreement between and among the Debtor, La Boliviana and Asesuisa is authorized and approved. The Effective Date of the Plan will be April 26, 2020. The funds to be utilized to pay Allowed Claims under the Plan will be deposited in Weiss Serota Helfman's Trust Account for the sole purpose of making such payments until all Allowed Claims have been paid in accordance with the Plan. A full-text copy of the order dated March 17, 2020, is available at https://tinyurl.com/vjpzsra from PacerMonitor at no charge. The Debtor is represented by: Aleida Martinez Molina, Esq. WEISS SEROTA HELFMAN COLE & BIERMAN, P.L. 2525 Ponce de Leon Boulevard, Suite 700 Coral Gables, FL 33134 Telephone: (305) 854-0800 E-mail: amartinez@wsh-law.com About Consis International Consis International LLC -- https://www.consisint.com/ -- provides computer systems design and related services. It was founded in August 1987 in Caracas, Venezuela. Consis International sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 18-22233) on Oct. 2, 2018. In the petition signed by Oscar Carrera, manager, the Debtor was estimated to have assets of less than $1 million and liabilities of $1 million to $10 million. Judge John K. Olson oversees the case. Weiss Serota Helfman Cole & Bierman, P.L., is the Debtor's legal counsel. CONTAINER STORE: Moody's Alters Outlook on B2 CFR to Negative ------------------------------------------------------------- Moody's Investors Service affirmed The Container Store, Inc.'s B2 corporate family rating, its probability of default rating at B2-PD and its first lien term loan at B2. The outlook was changed to negative from stable. "The negative outlook reflects the uncertainty around the duration of unit closures, impact on liquidity and the pace of rebound in consumer demand once the pandemic begins to subside", said Moody's analyst", Peggy Holloway. The Container Store has been able to keep a large percent of its stores open by being qualified as an essential business in some areas. The affirmation reflects the company's adequate liquidity and ability, so far, to keep many stores open that helps partially offset negative operating leverage. The company's term loan and revolving credit facility matures in September 2023, and its $100MM asset based revolving credit facility expires in August 2022. Affirmations: Issuer: Container Store, Inc. (The) Probability of Default Rating, Affirmed B2-PD Corporate Family Rating, Affirmed B2 Senior Secured Bank Credit Facility, Affirmed B2 (LGD4 from LGD3) Outlook Actions: Issuer: Container Store, Inc. (The) Outlook, Changed To Negative From Stable RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The Non-food retail sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in The Container Stores's credit profile, including its exposure to widespread store closures have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Container Store remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on The Container Store of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. The Container Store is constrained by the company's small scale, narrow focus on the niche, cyclical home storage and organization sector, as well as intense competition from better capitalized peers and the need for continued investment to sustain modest revenue growth. The credit profile also reflects governance risk related to the potential use of the balance sheet to facilitate an exit by the majority shareholder and private equity firm Leonard Green & Partners, L.P. At the same time, the credit profile benefits from The Container Store's recognized brand name and value proposition supported by a highly trained sales force and a sizeable offering of exclusive and proprietary products, such as custom closets. Additionally, the recent pandemic has increased interest in home organization products that will give the company a boost. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if the duration of the closures lingers, thereby squeezing liquidity or if the probability of default increases for any reason. Quantitatively, ratings could be downgraded if debt/EBITDA is sustained above 5.5x or EBIT/interest rises to 2.0x. Given the negative outlook an upgrade over the near term is unlikely. However, ratings could be upgraded once the impact of coronavirus has abated and operating performance has improved such that debt/EBITDA drops below 4.0x and EBITA/interest expense approaches 1.4x CONTINENTAL RESOURCES: S&P Lowers ICR To 'BB+', Outlook Negative ---------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating and unsecured debt ratings on Continental Resources Inc. to 'BB+' from 'BBB-'. S&P also assigned a '3' recovery rating to Continental's unsecured notes, indicating its expectation of meaningful (50% to 70%, rounded estimate 65%) recovery to creditors in the event of a payment default. S&P estimates cash flow/leverage measures will fall well below its expectations for the rating in 2020. Based on its revised oil and natural gas price deck assumptions, S&P now expects Continental's funds from operations (FFO) to debt to fall below 20% in 2020, from nearly 60% in 2019. The company has no oil or natural gas hedges in place, leaving the company susceptible to price volatility amid an uncertain commodity price outlook. Oil accounts for about 60% of the company's total production and thus profitability is strongly susceptible to moves in oil prices. Although Continental should be cash flow neutral this year due to a significant reduction in capital spending, S&P estimates a slight cash flow deficit in 2021 as the company ramps up spending to stem production declines. The negative outlook reflects S&P's view that - despite significant capital spending cuts - Continental's leverage is currently weak for the rating. S&P estimates FFO/debt will fall below 20% in 2020, improving to the 25% to 30% range next year as oil prices recover and the company increases spending and stems production declines. S&P's estimates also assume the company does not execute any share buybacks over the next two years, and that it takes steps to address its 2022 debt maturity by mid-2021. "We could lower the rating if Continental's FFO to debt remains below 20% for a sustained period, which would most likely occur if oil prices average below our current price deck assumptions, the company pursues a more aggressive spending program than we currently forecast next year, or if its production comes in below our expectations for several quarters. We could also take a negative rating action if the credit markets remain volatile, and the company does not address its 2022 debt maturity before it becomes current," S&P said. "We would consider a stable outlook if FFO/debt remains comfortably above 30% for a sustained period. This would most likely occur if oil prices recover back to at least $45/bbl and the company continues to exercise capital discipline," S&P said. COVANTA HOLDING: S&P Downgrades ICR to 'B+'; Outlook Stable ----------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on U.S.-based Energy from Waste (EfW) provider Covanta Holding Corp. to 'B+' from 'BB-'. S&P also lowered itsrating on the company's senior unsecured debt to 'B+' from 'BB-' and its rating on the company's deeply subordinated debt to 'B-' from 'B'. The company's leverage will remain above 6.5x through 2021. S&P measured Covanta's year-end 2019 adjusted debt to EBITDA at 6.5x and expect leverage to remain at or slightly above this level through 2021. The company is facing a number of market headwinds that weigh on profitability in the near term, namely depressed power and metals commodity prices. The company also continues to integrate recently acquired facilities into its operations base, which can lead to temporary increases in plant operating expense. Further, the company is completing its build out of its U.K. expansion plans, with three projects under construction and one in advanced development. The company receives development fees that help cover the cost of equity contributions; however S&P expects material cash outflows in 2022 and 2023. All of these factors weigh on cash flows and have contributed to an increase in leverage relative to S&P's previous expectations. "The stable outlook on Covanta reflects our view that leverage will top out at about 7x in 2020, before declining to the mid- to- high- 6x area in 2021. While plant operations and revenue from waste processing could be constrained in 2020 due to ongoing global efforts to contain the novel coronavirus than we currently forecast, we believe the highly contracted nature of Covanta's cash flows--through both waste service contracts and energy hedges --limit the company's downside in 2020," S&P said. Factors that could lead to a rating downgrade would likely involve poor operational performance, including boiler availability of less than 90% or further declines in metals and power prices such that adjusted debt to EBITDA is above 7.0x or FFO to debt is below 9% on a sustained basis. S&P could also consider a downgrade if financial policy, which has become more favorable in its opinion, reverts and becomes more aggressive with capital allocations that are disadvantageous to creditors. "We could consider an upgrade if operating results continue to be solid, performance recontracting in energy from waste assets remains strong, and financial performance improves such that we had confidence adjusted debt to EBITDA and FFO to debt would remain below 6x and above 12% on a sustained basis," S&P said. Note: While S&P previously rated Covanta's senior secured debt, these ratings were withdrawn at the issuer's request," S&P said. COVIA HOLDINGS: Moody's Cuts CFR to Caa1 & Alters Outlook to Neg. ----------------------------------------------------------------- Moody's Investors Service downgraded Covia Holdings Corporation's Corporate Family Rating to Caa1 from B3, Probability of Default Rating to Caa1-PD from B3-PD and the rating on the company's senior secured credit facility to Caa1 from B3. In addition, Moody's maintained Covia's Speculative Grade Liquidity of SGL-3. The rating outlook was changed to negative from stable. "With the sudden and severe decline in oil & gas prices, Moody's expects a significant decline in demand and prices of frac sand to negatively impact Covia's profitability and credit metrics making its capital structure less tenable," said Emile El Nems, a Moody's VP-Senior Analyst. The downgrade reflects Moody's expectation that revenues, profitability and key credit metrics will deteriorate further during 2020 due to ongoing volatility in the oil and natural gas end market and persistent weakness in the frac sand industry. Despite, mine closures and production cuts, Moody's, does not expect any significant recovery in the price of frac sand in the short term. At year-end 2020, Moody's (inclusive of Moody's adjustments) expects debt-to-EBITDA to increase to 9.3x. Downgrades: Issuer: Covia Holdings Corporation Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Corporate Family Rating, Downgraded to Caa1 from B3 Senior Secured Bank Credit Facility, Downgraded to Caa1 (LGD3) from B3 (LGD3) Outlook Actions: Issuer: Covia Holdings Corporation Outlook, Changed to Negative from Stable RATINGS RATIONALE Covia's Caa1 CFR reflects the persistent weakness in the frac sand industry, declining profitability and deteriorating credit metrics. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook and falling oil prices are creating a severe and extensive credit shock across the energy sector, a key end market for Covia. More specifically, the weakness in Covia's credit profile has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Governance considerations include risks associated with an aggressive financial policy. Given the company's current capital structure and the trading levels of its debt securities, Moody's expects the company may conduct additional debt repurchases at a discount. These would likely be deemed a distressed exchange by Moody's. At the same, Moody's takes into consideration, the company's market position as one of the largest producers of frac and industrial/specialty sand in the US, its distribution capability, its product mix and adequate liquidity profile. The negative outlook reflects the company's elevated leverage and volatility of earnings should the industry downturn persist longer than anticipated. Moody's outlook also takes into consideration that prolonged pressure on the company's operating results jeopardizes the sustainability of its capital structure and increases the likelihood of the need to restructure. Moody's maintains Covia's SGL-3 Speculative Grade Liquidity Rating (SGL-3) to reflect the expectation that the company will maintain an adequate liquidity profile resulting from its ability to fund operations, service its debt and deploy capital with cash flow and available cash. The company had $320 million of cash on hand at December 31, 2019, and has no near-term debt maturities, as its $1.6 billion term loan matures in 2025. Factors that would lead to an upgrade or downgrade of the ratings: The rating could be upgraded if: - The company improves its free cash flow and its liquidity profile - Oil and natural gas end markets stabilize The rating could be downgraded if: - The company's liquidity profile deteriorates - The potential losses for lenders increase - Operating margins deteriorate further The principal methodology used in these ratings was Building Materials published in May 2019. Based in Independence, Ohio, Covia [NYSE: CVIA] is a leading provider of specialty sands and minerals serving the energy and industrial end markets. The company has approximately 50 million tons of annual processing capacity. In June 2018, Unimin Corporation and Fairmount Santrol, Inc. combined in a cash and stock transaction to create Covia, with Sibelco as the largest shareholder owning approximately 65% of the shares. Sibelco (SCR-Sibelco NV), is a privately held, globally-diversified, industrial minerals company based in Belgium. Covia is currently organized into two segments: (1) energy (oil & gas), which serves the oil & gas exploration and production industry, and (2) industrial products (ISP), which serves the industrial end markets (foundry, automotive, glassmaking, filtration industries, etc.). CYPRESS LAWN: Unsecured Creditors to Get 20% Dividend Over 5 Years ------------------------------------------------------------------ Debtor Cypress Lawn and Landscaping Company, Inc. filed with the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, a Disclosure Statement for Plan of Reorganization on March 17, 2020. Since the initial bankruptcy filing, the Debtor has reduced overhead expenses by a number of factors. The Operations Manager of the Debtor was terminated and the Debtor’s Principal, Craig Herring, has assumed a more active role with respect to the day-to-day operations of the company. In addition to cutting expenses, the Debtor has formed a new relationship with a local home builder that is building homes in the Cypress, Texas and Bryan/College Station, Texas area. In December 2019 and January 2020, the Debtor completed three projects with this home builder for total new revenue of over $31,000. The Debtor projects to complete approximately thirty new projects over the next 12 months with this builder. The Debtor projects a net profit for the 2020 calendar year of $16,075, with an estimated 15% margin for error. As a result, this projected profit will provide an annual projection of $13,644 in disposable funds available to fund manageable Chapter 11 Plan payments and an estimated 20% dividend to the Debtor's general unsecured creditors over a course of 5 years. Each creditor holding a Class 6 Claim will be paid 20% of its allowed claim, paid out in equal monthly installments over 60 months, commencing on the 20th day of the first month after the Effective Date or when such claim is allowed or ordered paid by Final Order of the Court, whichever date is later. Class 7 Allowed, Unsecured Claims of $1,000 or less will each receive 70% of the amount of its claim, in cash, on the Effective Date or when such claim is allowed or ordered paid by Final Order of the Court, whichever date is later. The Debtor's Principal, Craig Herring, is expected to infuse in the Debtor a total of $24,000 in capital contributions over the course of the Debtor's proposed 5 year Chapter 11 Plan of Reorganization payout to ensure that all Plan payments are fully funded. The Debtor is in the process of arranging to fund the Plan of Reorganization out of the Debtor's projected significant, improvement in overall income over the next few months and years. A full-text copy of the Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/yxypumhu from PacerMonitor at no charge. The Debtor is represented by: Matthew Hoffman Alan B. Saweris HOFFMAN & SAWERIS, P.C. 2777 Allen Parkway, Suite 1000 Houston, Texas 77019 Tel: (713) 654-9990 Fax: (713) 654-0038 About Cypress Lawn Cypress Lawn and Landscaping Company, Inc., filed a Chapter 11 petition (Bankr. S.D. Tex. Case No. 19-35262) on Sept. 19, 2019. The Debtor's counsel is Matthew Hoffman, Esq. of HOFFMAN & SAWERIS, P.C. DAYCO LLC: S&P Cuts ICR to 'CCC+' on Coronavirus Pandemic Effects ----------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Dayco LLC to 'CCC+' from 'B-'. At the same time, S&P lowered its issue-level rating on the company's term loan to 'CCC+' from 'B-'. The '4' recovery rating remains unchanged. Dayco's high leverage, negative cash flow generation, and exposure to the original equipment (OE) market (accounting for about 60% of revenue) renders it vulnerable to the ongoing coronavirus pandemic. Although there continues to be significant uncertainty around the effects of the pandemic, Dayco's operating performance will likely deteriorate over the next six months or longer depending on how long the original equipment manufacturers (OEMs) keep their production shuttered. The negative outlook on Dayco reflects the uncertainty around the severity and scope of the coronavirus pandemic and the at least one-in-three possibility that the company's metrics will be even weaker than S&P currently expects. "We could lower our rating on Dayco in the next 12 months if we believe it is increasingly likely that the company will engage in a restructuring transaction that we consider distressed (whereby existing debtholders receive less than par). This could occur if the company's revenue, earnings, or cash outflow decline by more than we currently forecast and constrain its liquidity," S&P said. "We could revise our outlook on Dayco to stable if the company is able to manage its costs amid the pandemic, or if its revenue is higher than we forecast, leading it to generate a FOCF-to-debt ratio of at least break even," S&P said. DCP MIDSTREAM: S&P Alters Outlook to Negative, Affirms 'BB+' ICR ---------------------------------------------------------------- S&P Global Ratings revised the outlook on DCP Midstream L.P. (DCP) to negative from stable. At the same time, S&P affirmed the 'BB+' issuer credit rating on the company, the 'BB+' rating on its senior unsecured debt, the 'BB-' rating on its junior subordinated notes, and the 'B+' rating on its preferred stock. "We revised our financial forecast to include our recently lowered commodity price assumptions, leading to EBITDA that is materially lower than previously expected over the next two years. Generally speaking, DCP has more direct commodity exposure than the peer group. In 2020, about 70% of its margins are generated from fixed-fee contracts and another 9% of margin is hedged, leaving the balance of 21% directly exposed to commodity prices. In 2021, about 23% of margin is exposed to commodity prices considering a slightly lower hedge level. As a result, the lower price projections have an immediate and material negative impact on expected cash flows," S&P said. The negative outlook reflects S&P's view that adjusted debt leverage at the partnership will be over 5x in 2020. S&P expects the partnership to reduce its cash uses over the next 12-18 months in order to moderate leverage and support liquidity, however the rating agency expects credit metrics will remain elevated over the next year. "We could downgrade the company if leverage remains above 5x. This could happen due to weaker than expected volumes and cash flows. We could also downgrade the partnership if liquidity deteriorates, especially considering our expectation for limited covenant headroom," S&P said. "We could revise the outlook to stable if the company is able to moderate leverage such that debt/EBITDA falls below5x and remains in that range on a sustained basis in our forecast. This would likely occur if the company is able to retain cash to both moderate its debt and refinance its September 2021 maturity," S&P said. DIGITAL RIVER: Moody's Affirms 'B2' Corp. Family Rating ------------------------------------------------------- Moody's Investors Service affirmed the ratings of Digital River, Inc., including the B2 Corporate Family Rating, B2-PD Probability of Default Rating, Ba3 rating on the first lien credit facilities and B3 rating on the second lien term loan. The outlook remains negative. The ratings affirmation reflects Digital River's improved liquidity as a result of a $50 million cash equity investment from its sponsor, Siris Capital, and other co-investors. This infusion was used to repay a portion of debt and will also provide the company with needed financial flexibility to fund sizeable investments expected over the next 12 months, which will increase Moody's adjusted debt-to-EBITDA to above 10x. In conjunction with the equity raise, Digital River extended its existing credit facilities by two years. In February 2020, Digital River executed an amendment with its existing lender group, whereby the company's revolver was extended to August 2022 from March 2020, first lien term loan was extended to February 2023 from February 2021, second lien term loan was extended to February 2024 from February 2022. In addition, the company repaid $10 million of its first lien term loan reducing the outstanding balance to $60.6 million, and reduced its second lien term loan outstanding balance by $0.5 million to $19.5 million. The committed revolver availability was also reduced to $5 million from $10 million. Moody's took the following actions: Affirmations: Issuer: Digital River, Inc. Probability of Default Rating, Affirmed B2-PD Corporate Family Rating, Affirmed B2 2nd Lien Senior Secured Bank Credit Facility, Affirmed B3 (LGD4) from (LGD5) 1st Lien Senior Secured Bank Credit Facilities, Affirmed Ba3 (LGD2) Outlook Actions: Issuer: Digital River, Inc. Outlook, Remains Negative RATINGS RATIONALE Digital River's B2 CFR reflects its small and concentrated business profile and the loss of two major customers in the period of 2017 through 2019, with the operations of both concluding over 2019 and 2020. Moody's expects meager profitability and negative free cash flow in 2020 as Digital River continues to invest in its strategy to modernize its leading payment processing and order management platform. In addition, there is a risk that Digital River will be negatively impacted by weakening global business conditions in 2020, however the company's predominant focus on software, subscription and gaming end products provides some downside protection. In case of a more pronounced impact than currently anticipated, Moody's would expect the company to pare down its investment plans to preserve liquidity. The rating is supported by governance considerations, specifically support from its private equity sponsor, as demonstrated by the sponsor' recent equity investment of $50 million that provides the company with investment funding to implement its growth strategy. Digital River also has a track record of sizable debt repayment, aided by asset divestitures and cash flow. Digital River's ratings benefit from its long-standing client base of leading software and consumer electronics companies, and favorable industry dynamics in the global ecommerce market with strong long-term growth rates. Moody's expects that Digital River will maintain good liquidity over the next 18 months and will continue to grow its core ecommerce business, such that profitability improves and leverage is on track to decline to below 5.5x by 2022. The negative outlook reflects Moody's expectation that Digital River's leverage will remain elevated over the next 12-18 months. The negative outlook also reflects the risks associated with future deleveraging and positive free cash flow generation, which will largely depend on the success of the company's investments and the ability to achieve double-digit organic revenue growth. Digital River's good liquidity is supported by available cash balance of around $96 million (pro forma for $50 million of new cash equity and $10.5 million debt repayment). This cash will be sufficient to cover an operating cash outflow expected in 2020 due to $12 million of additional R&D investments and $9 million of capital investments. The revolver availability was reduced to $5 million, but Moody's expects the revolver to remain undrawn. The financial maintenance covenants on the first and second lien term loans were amended, and Moody's projects the company to remain in compliance with the covenants over the next 12 months, including maintaining $25 million of required minimum liquidity. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Factors that would lead to an upgrade or downgrade of the ratings: The upgrade of ratings is currently unlikely. However, the ratings could be eventually upgraded if Digital River achieves double-digit revenue growth, free cash flow to debt of at least 10%, and adjusted debt-to-EBITDA below 3.5x on a sustained basis with an expectation of disciplined financial policies. The company will also have to increasingly diversify its customer base. The ratings could be downgraded if revenue growth does not materialize in 2021, free cash flow remains negative, or liquidity weakens. The inability to refinance existing debt well ahead of its maturity dates could also pressure the ratings. Digital River, Inc., headquartered in Minnesota, is a provider of ecommerce and payment services that support the sale and fulfillment of primarily software, consumer electronics and gaming products. The company generated revenues of approximately $216 million in 2019. Digital River is owned by private equity sponsor Siris Capital Group. DILLARD INC: Fitch Lowers LT IDR to BB, Outlook Negative -------------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Rating for Dillard's, Inc. to 'BB' from 'BBB-'. The Rating Outlook is Negative. The downgrade and Negative Outlook reflects the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp decline in EBITDA to under $50 million in 2020 from $392 million in 2019 on a revenue decline of over 20% to $5 billion. Adjusted leverage is expected to be over 2x in 2021, assuming revenue declines in the low-teens and EBITDA of approximately $300 million or around 30% lower compared to 2019 levels. Leverage could return below 2x in 2022 assuming a sustained topline recovery. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Dillard's has sufficient liquidity to manage operations through this downturn. Dillard's had a cash balance of $277 million as of Feb. 1, 2020, and $779 million available under its $800 million credit facility, net of letters of credit outstanding. The company has minimal near term debt maturities with the next debt maturity of $45 million in January 2023. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retail stores in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved. It will also depend on the economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch has assumed a scenario where discretionary retailers in the U.S. are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid-to-high single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expect total 2021 sales could remain 8%-10% below 2019 levels. Fitch has forecasted that department store sales, which have been on a secular decline, will fare worse with 2021 sales projected to decline in the low to mid-teens. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, with 2022 projected as a modest growth year. Assuming this scenario, Fitch expects Dillard's revenue to decline over 20% in 2020 with EBITDA decline to under $50 million from $392 million in 2019. In 2021, Fitch expects revenue to decline in the low teens and EBITDA to decline around 30% compared to 2019 levels. Sector Challenges Weigh on Business: Dillard's is the sixth largest department store chain in the U.S. in terms of sales, with 2019 retail revenue of $6 billion, 257 stores, and 28 clearance centers in 29 states concentrated in the southeast, central and southwestern U.S. While most U.S. brick-and-mortar retailers are battling competitive incursion from online and value-oriented players, sales weakness is most pronounced for mid-tier apparel and accessories retailers. While leading players such as Nordstrom, Kohl's, and Macy's have been able to largely offset decline in in-store sales through the growth in their e-commerce businesses, retailers are forced to invest heavily in omnichannel platforms, which have driven down EBITDA margins and reduced cash flow. Successful retailers in the space are investing in the omnichannel model, rightsizing their store footprint, and have a differentiated product and service offering, including a well-developed value message, to draw customers in. Financially and operationally stronger department stores should be able to at least maintain their share of the apparel and accessories space over the longer term. These companies are expected to benefit from store closings and restructuring activity from cash-constrained specialty apparel players and department stores, which could further accelerate in a downturn environment. Dillard's ratings reflect the company's below-industry-average sales productivity (as measured by sales psf), operating profitability with EBITDA margin in the mid-single digits, and geographical concentration relative to its higher-rated department store peers. Operational challenges in the mid-tier department store sector and exposure to oil-dependent states of Texas, Louisiana and Oklahoma (28% of stores) caused the company's comps to decline meaningfully from positive 1% in 2014 to negative 2% in 2015 and negative 5% in 2016 before flattening out in 2017 and turning positive at 2% in 2018. Comp sales declined 1% in 2019. Overall, retail sales have declined 7% while EBITDA is down over 50% in 2019 (with EBITDA margin at 6.2% versus 12.1%) since 2014. Dillard's has improved its merchandise assortment towards more upscale brands, better in-store execution and strong inventory control. The company has been able to add strong brands to its portfolio over the last several years due to its focus on a non-promotional strategy, which is a differentiating factor within its peer group. DERIVATION SUMMARY The rating downgrades and outlook revisions for the department stores reflect the significant business interruption from the coronavirus and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Kohl's, Nordstrom, Macy's and Dillard's are expected to have sufficient liquidity to manage operations through this downturn, should Fitch's projections come to fruition. Dillard's U.S. department store peers include Nordstrom, Inc., Kohl's, Macy's, Inc. and J.C. Penney Company, Inc. Dillard's (BB/Negative): Fitch anticipates a sharp decline in EBITDA to under $50 million in 2020 from $392 million in 2019 on a revenue decline of over 20% to $5 billion. Adjusted leverage is expected to be over 2x in 2021, assuming sales declines in the low-teens and EBITDA of approximately $300 million or around 30% lower compared to 2019 levels. Dillard's ratings reflect the company's below-industry-average sales productivity (as measured by sales psf), operating profitability and geographical concentration relative to its larger department store peers, Kohl's, Nordstrom and Macy's. The ratings consider Dillard's strong liquidity and minimal debt maturities, with adjusted debt/EBITDAR expected to return to the 2x range in 2021. Nordstrom (BBB/Negative): Fitch projects adjusted leverage increasing to 7x in 2020 from 3x in 2019, based on EBITDA declining to approximately $550 million from $1.6 billion on a sales revenue decline of over 20% to $12 billion. Adjusted leverage is expected to decline to the low 3x in 2021, assuming sales declines of around 10% and EBITDA declines of around 20% in 2021 from 2019 levels. Nordstrom's ratings reflect its position as a market share consolidator in the apparel, footwear and accessories space, with its differentiated merchandise and high level of customer service enabling the company to enjoy strong customer loyalty. The company has a well-developed product offering across a diverse portfolio of full line department stores, off-price Nordstrom Rack locations and multiple online channels. Kohl's (BBB-/Negative): Fitch anticipates Kohl's leverage to increase to over 6x in 2020 from 2.3x in 2019, based on EBITDA declining to approximately $550 million from $2 billion on a sales decline of 20% to under $16 billion. Adjusted leverage is expected to be in the mid 3x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Kohl's ratings reflect its position as the second largest department store in the U.S. and Fitch's expectation that the company should be able to able to accelerate market share gains post the discretionary downturn. Kohl's has a well-developed omnichannel strategy, with online sales contributing close to 25% of total revenue which should benefit its top-line as retail sales continue to move online. Kohl's off-mall real estate footprint provides some insulation from mall traffic challenges. Macy's (BB+/Negative): Fitch anticipates leverage increasing to over 11x in 2020 from 2.9x in 2019, based on EBITDA declining to approximately $325 million from $2 billion on a revenue decline of nearly 25% to $19.2 billion. Adjusted leverage is expected to be around 4x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Macy's ratings continue to reflect its position as the largest department store chain in the U.S. and Fitch's view of a prolonged timeframe for the company's operating trajectory to stabilize on a lower EBITDA base, given weak mall traffic and heightened competition from alternate channels that include online and off-price. J.C. Penney (CCC-): Fitch expects J.C. Penney's EBITDA could turn materially negative in 2020 in the range of negative $400 million. While the company ended 2019 with $1.8 billion in liquidity (cash and revolver), the significant disruption from coronavirus have led to heightened liquidity concerns over the next 12 months given the projected cash burn. KEY ASSUMPTIONS Here are Fitch's projections prior to disruption related to coronavirus: -- Comps to be flat to modestly negative over the next three years. -- EBITDA to remain in the high $300 million range, with EBITDA margin in 6% range. -- FCF of approximately $150 million to $160 million annually. FCF was expected to be largely directed towards share buybacks. -- Adjusted debt/EBITDAR to remain in the mid-1x range. Here are Fitch's revised projections reflecting the significant business interruption from coronavirus and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch expects Dillard's revenue to decline over 20% in 2020 with EBITDA declining to under $50 million from $392 million in 2019, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. While 2021 revenue and EBITDA should significantly rebound from depressed 2020 levels, Fitch expects 2021 revenue of approximately $5.6 billion and EBITDA of around $270 million to be approximately 12% and 30% below 2019 levels given its expectations of a likely downturn in discretionary spending that could extend well into late 2021. Fitch's revenue expectations reflect its views that retail discretionary spending will decline 40% in first half 2020, be down mid-to-high single digits in second half 2020, and sales in 2021 will be down 8%-10% from 2019 levels, with declines in department store sales more material on a relative basis. -- Beginning 2022, Dillard's could resume low-single digit topline and EBITDA growth. -- FCF is expected to be negative by approximately $150 million in 2020, largely due to a near $350 million reduction in EBITDA, somewhat mitigated by lower cash taxes and reduced capital expenditures. FCF in 2021 could turn positive as EBITDA improves. -- Adjusted debt/EBITDAR, which was 1.6x in 2019 is expected to increase sharply in 2020 on minimal EBITDA, before declining to the mid-2x in 2021 on EBITDA swings. -- Dillard's ended 2019 with $277 million of cash and investments and $779 million available on its $800 million unsecured revolver. Fitch anticipates Dillard's has sufficient liquidity to weather the current operating climate, should Fitch's rating case assumptions come to fruition. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action -- A stabilization case would require Dillard's to meet Fitch's revised projections that include EBITDA increasing to approximately $300 million in 2021 and close to $325 million in 2022, with adjusted debt/EBITDAR moderating to mid-2x in 2021 and under 2x in 2022. -- An upgrade could result in the event that Dillard's generates low single-digit positive comparable store sales gains and EBITDA in excess of $500 million, with adjusted debt/EBITDAR in the mid-1x. Developments that May, Individually or Collectively, Lead to Negative Rating Action -- A negative rating action could result from a more protracted or severe downturn and reduced confidence in Dillard's ability to return to top line and profitability growth in 2022 such that EBITDA remains below $300 million and adjusted debt/EBITDAR is sustained above mid-2x. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE In spite of the significant decline in EBITDA over the past few years, Dillard's credit metrics remain strong with adjusted debt/EBITDAR in the 1.5x range over the last few years. Dillard's has sufficient liquidity to manage operations through this downturn. Dillard's ended with a cash balance of $277 million as of Feb. 1, 2020, and $779 million available under its $800 million credit facility, net of letters of credit outstanding. The company has minimal near term debt maturities with the next debt maturity of $45 million in January 2023. Annual capex in 2019 was slightly lower than 2018 at approximately $100 million, and was used for store updates (in the more productive areas of the store), modest new store openings and online growth initiatives. Net of new store openings, Dillard's has closed 11 stores in the last six years, with overall square footage down over 10% over the last 10 years. RECOVERY CONSIDERATIONS Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. Dillard's $800 million senior unsecured revolver senior unsecured notes are rated 'BB/RR4', indicating average (31%-50%) recovery prospects. The $200 million in capital securities due 2038 are rated two notches below the IDR at 'B+'/'RR6', reflecting their structural subordination. Dillard's owns 90% of its retail sf, all of which is unencumbered. SUMMARY OF FINANCIAL ADJUSTMENTS -- EBITDA adjusted to exclude stock-based compensation -- Operating lease expense capitalized by 8x for historical and projected adjusted debt DWS CLOTHING: Amended Disclosure Hearing Continued to July 9 ------------------------------------------------------------ Debtor DWS Clothing Too, LLC, filed with the U.S. Bankruptcy Court for the Southern District of Florida, West Palm Beach Division, a Third Agreed Motion to continue Disclosure Hearing and Related Deadlines. On March 17, 2020, Judge Erik P. Kimball granted the motion and ordered that: * The hearing to consider approval of Debtor’s Amended Disclosure Statement is continued to July 9, 2020, at 10:30 a.m. at the Flagler Waterview Building, 1515 N. Flagler Drive, Courtroom B, 8th Floor, West Palm Beach, Florida 33401. * The Debtor will file an Amended Plan and Disclosure Statement on or before July 2, 2020. * July 7, 2020, is the deadline for objections to the Amended Disclosure Statement. A full-text copy of the Order dated March 17, 2020, is available at https://tinyurl.com/tgoxalq from PacerMonitor at no charge. The Debtor is represented by: Jordan L. Rappaport, Esquire RAPPAPORT OSBORNE & RAPPAPORT, PLLC 1300 N. Federal Highway, Suite 203 Boca Raton, FL 33432 Telephone: (561) 368-2200 Facsimile: (561) 338-0350 About DWS Clothing Too Operating as Alene Too, DWS Clothing Too, LLC, sells women's clothes. DWS Clothing Too sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 18-25551) on Dec. 14, 2018. In the petition signed by Maxine Schwartz, member, the Debtor was estimated to have assets of less than $50,000 and liabilities of $1 million to $10 million. The case is assigned to Judge Mindy A. Mora. Rappaport Osborne & Rappaport, PLLC, is the Debtor's counsel. ELWOOD ENERGY: Moody's Alters Outlook on Ba1 CFR to Stable ---------------------------------------------------------- Moody's Investors Service affirmed the Ba1 rating on Elwood Energy LLC's $141 million 8.159% senior secured bond due 2026. The rating outlook was revised to stable from positive. RATINGS RATIONALE The affirmation of Elwood's Ba1 rating reflects the project's low leverage with $82 debt/kw at the end of third quarter 2019 and cash flow visibility via cleared PJM capacity auction revenues extending until May 2022. According to its mandatory amortization schedule, the project will have $54 million of debt outstanding at the end of 2022 when its remaining merchant tail risk commences. Moody's projects Elwood will achieve strong credit metrics, including debt service coverage ratios (DSCR) above 1.6x, through the period of known PJM capacity results ending in mid-2022. In fiscal year 2019, Moody's calculates that Elwood achieved a DSCR of 1.66x, CFO/Debt of 28% and 1.7x Debt/EBITDA. The change in Elwood's outlook to stable from positive considers both the heightened uncertainty around the next PJM auction and the project's resiliency under downside capacity price scenarios. Substantially all of Elwood's income comes from PJM capacity payments and cash flow beyond mid-2022 is dependent on the clearing price of the COMED region of PJM where it competes. PJM's auction for the 2022/23 planning period has been delayed since May 2018; current estimates for several months now, and there is significant uncertainty as to when the next auction will take place. In addition, the implications of Federal Energy Regulatory Commission's (FERC) recent order on the mitigation of subsidized units for the PJM capacity market are unknown. While the new ruling may add upward pressure to future capacity prices, it might also result in Illinois pulling the region out of the PJM capacity market. This adds to uncertainty on both the capacity market construct and expected future capacity prices particularly during 2022 when Elwood's when debt service peaks. Beyond 2022, the project's low leverage provides financial flexibility and an almost 50% decline of debt service starting in 2024 allows for around a 30% drop in capacity prices before the project is unable to fully cover debt service. Outlook The stable outlook reflects that Elwood can maintain high plant availability and produce average DSCR metrics of at least 1.2x after accounting for major maintenance contributions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Factors that could lead to an Upgrade The rating could be upgraded if Elwood clears its capacity at strong prices in the next PJM capacity auction covering the 2022/23 May-June period or if it enters into new, long term contracts resulting in steady debt service coverage metrics of at least 1.5x. Factors that could lead to a Downgrade A downgrade is unlikely but could occur in the event that Elwood is unable to produce power in a scarcity situation for an extended period of time, or experienced a major operational disruption such that its DSCR fell below 1.2x on a sustained basis or if the state of Illinois were to remove the COMED region from the PJM capacity market creating uncertainty into forward price formation for future capacity revenues. Profile Elwood Energy LLC owns a 9-unit gas-fired power plant located in Elwood, Illinois. It competes in the COMED sub-region of PJM and operates as a peaking facility with an average capacity utilization factor around 2-5%. EMERALD X: Moody's Cuts CFR to B2, On Review for Downgrade ---------------------------------------------------------- Moody's Investors Service downgraded Emerald X, Inc. corporate family rating to B2 from B1 and its probability of default rating to B3-PD from B2-PD as a result of anticipated financial performance deterioration related to coronavirus outbreak. Moody's has also downgraded ratings on the company's $150 million revolving credit facility and a $530.9 million term loan B to B2 from B1. The Speculative Grade Liquidity rating has been revised to SGL-3 from SGL-2, reflecting adequate liquidity. Emerald's ratings have been placed under review for further downgrade. The ratings downgrade and placement under review reflects Moody's expectation for meaningful deterioration in Emerald's financial performance, at a minimum, through June 2020, due to event cancellations and postponements stemming from coronavirus containment measures. Moody's anticipates additional near-term pressure on Emerald's liquidity as it awaits the receipt of event-cancellation insurance proceeds while managing uncertainty and the evolving impacts of the coronavirus outbreak on its events business. Issuer: Emerald X, Inc. Corporate Family Rating, Downgraded to B2 from B1, Placed Under Review for further Downgrade Probability of Default Rating, Downgraded to B3-PD from B2-PD, Placed Under Review for further Downgrade Senior Secured Bank Credit Facilities, Downgraded to B2 (LGD3) from B1 (LGD3), Placed Under Review for further Downgrade Speculative Grade Liquidity Rating, Revised to SGL-3 from SGL-2 Outlook Actions: Outlook Actions: Outlook, changed to Rating Under Review from Stable RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The trade show sector has been one of the sectors most significantly affected by the shock given its sensitivity to in-person business activity. More specifically, the weaknesses in Emerald's credit profile, including its exposure to in-person events have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Emerald remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Emerald of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Moody's anticipates adequate liquidity over the near term supported by cash on hand, the variable cost structure of the company's business and the temporary suspension of dividends. Moody's expects that the revolving credit facility will be drawn, and if over 35% of availability is drawn (over $52.5 million), the company will be subject to its springing financial covenant. The terms of the company's credit agreement permit certain addbacks for canceled or postponed events, which may provide some cushion against the net first lien leverage ratio test. However, if coronavirus outbreak and its macroeconomic impact remains prolonged, there is an increased likelihood that the company could breach the covenant. Moody's expects the company to generate negative free cash flow over the next 9-12 months. The review for downgrade will focus on the timing and amount of event cancellation insurance proceeds, the company's need and ability to incrementally draw on its revolving credit facility, the ability to rebook postponed trade shows, and better visibility into the severity and duration of social distancing containment measures as enacted in response to coronavirus outbreak. Although unlikely in the near term, factors that could lead to an upgrade include stabilization of the revenue base, free cashflow to debt of approximately 10%, leverage sustained at or below 4.5x, and good liquidity position. Factors that could lead to a downgrade include weaker liquidity position due to inability to collect on the company's event cancellation insurance at expected coverage levels, prolonged coronavirus shocks resulting in lengthy cancelations and postponements of shows, materially weaker attendance at the trade shows that are operating, or increased likelihood of a covenant breach. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Emerald X, Inc. (fka Emerald Expositions Holding, Inc.'s) is one of leading operators of business-to- business events and tradeshows. The company operates tradeshows in several industry sectors (Gift, Home, & General Merchandise; Sports; Design and Construction; Technology; Jewelry and Other trade shows including Photography, Food, Healthcare, Industrials, and Military). Following the 2017 IPO and recent secondary offering, funds managed by Onex and its affiliates own approximately 66% of the company as of 2019 and Emerald is considered a controlled company as defined by the New York Stock Exchange. Emerald is headquartered in San Juan Capistrano, California. Revenue in 2019 was $361 million. EMPLOYBRIDGE LLC: Moody's Alters Outlook on B2 CFR to Negative -------------------------------------------------------------- Moody's Investors Service changed EmployBridge, LLC's outlook to negative from stable and affirmed its existing ratings, including its corporate family rating to and its probability of default rating at B2 and B2-PD, respectively. At the same time, Moody's affirmed the instrument ratings on Employbridge's senior secured first lien term loan due 2025 at B3. The outlook is negative. "The change in EmployBridge's outlook to negative is driven by the company's exposure to the onset of the coronavirus pandemic that Moody's expects will drive leverage towards its previously indicated downgrade indicator of 5 times during the next 12 months. The company will likely be impacted by the pressure placed on its small and medium sized customers in the manufacturing industry," said Andrew MacDonald, Moody's analyst. "Moody's anticipates credit quality could decline rapidly, at least in the short term, however Moody's believes the company has sufficient liquidity provisions to weather the spread of the coronavirus until returning to growth in 2021." The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The staffing industry is likely to be one of the sectors most significantly affected given the tendency of employers to quickly cut temporary workers and reduce hiring when economic conditions deteriorate. Initial employment data stemming from the COVID-19 outbreak is extremely negative as the increase of initial jobless claims in the US rose to a record high 3.3 million claims for the week ending 21 March 2020 and is significantly higher than the previous record of 695,000 in October 1982. More specifically, the weaknesses in EmployBridge's credit profile, including its exposure to the US light industrial customers have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on EmployBridge of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. RATINGS RATIONALE The B2 CFR reflects EmployBridge's modest profitability, which is typical of temporary staffing companies and Moody's debt to EBITDA was 3.3x for the twelve months ended September 30, 2019 that is expected to increase towards 5 times during the next 12 months driven by a decline in earnings related to the coronavirus outbreak. Moody's anticipates specific sector-based employment conditions, especially light industrial manufacturing, will disproportionately impact the company driven by statewide shelter-in-place mandates and, more broadly, by Moody's anticipated contraction in the global economy in the second half of 2020. Supporting the ratings its Moody's expectation of adequate liquidity. The company's $250 million Asset-Based Lending Facility ("ABL") due 2023 has been fully drawn, leaving the company with approximately $124 million of cash as of March 2020. Moody's expects the company will look to rationalizing fixed charges to offset any revenue declines and anticipate working capital should initially be a source of cash in a downturn. Free cash flow is expected to be volatile during the next 12 to 18 months depending on the severity of the impact of coronavirus, however the company's existing cash balance and a lack of near-term maturities provides key support for the rating and adequate liquidity. Of note, the company's quarterly mandatory amortization payments on its first lien term loan steps down to $1.2 million from $6 million after September 2020. The negative outlook reflects Moody's expectation of a weakening of credit metrics and liquidity given the company's exposure to temp staffing demand in the small to medium sized business across the manufacturing sector. Factors that would lead to an upgrade or downgrade of the ratings: Although not likely in the near term, the ratings could be upgraded if EmployBridge generates revenue and EBITDA growth such that supports debt-to-EBITDA below 4x, free cash flow-to-debt in the high single digits percentages, EBITDA margins around 5% and good liquidity. Conversely, ratings could be downgraded if Moody's expects debt-to-EBITDA above 5x, free cash flow-to-debt less than 1%, or if liquidity is weak. Affirmations: Issuer: Employbridge LLC Probability of Default Rating, Affirmed at B2-PD Corporate Family Rating, Affirmed at B2 Senior Secured Bank Credit Facility, Affirmed at B3 (LGD4) Outlook Actions: Issuer: Employbridge LLC Outlook, Changed To Negative From Stable EmployBridge is a provider of temporary and contract staffing services through company owned and franchised locations throughout the U.S. The company offers temporary staffing, temp-to-hire, and direct placement services and derives most of its revenues from the placement of light industrial, transportation and clerical staff. EmployBridge is owned by parties including affiliates of Anchorage Capital Group, L.L.C. and BlueMountain Capital, who are former creditors of the company, then called Koosharem LLC (doing business as Select Staffing), which emerged from bankruptcy in May 2014. On February 9, 2015, the company acquired and merged with EmployBridge Holding Company for $410 million; the combined company adopted the EmployBridge name and senior management team. Revenue for the twelve months ended September 30, 2019 were $3.16 billion. EMPLOYBRIDGE LLC: S&P Places 'B' ICR on Watch Negative ------------------------------------------------------ S&P Global Ratings placed all of its ratings on EmployBridge LLC, including its 'B' issuer credit rating, on CreditWatch with negative implications. The CreditWatch placement reflects EmployBridge's vulnerability to an economic downturn stemming from the coronavirus pandemic and S&P's uncertainty about the duration and extent of the outbreak. U.S. companies are increasingly closing their manufacturing facilities and laying off workers. According to the U.S. Department of Labor, the number of new jobless claims filed by individuals seeking unemployment benefits rose to 3.28 million as of March 26, 2020, from 281,000 the previous week. S&P is also unsure when the conditions in the labor market will return to normal. Temporary staffing companies, such as EmployBridge, can face immediate and significant consequences from turmoil in the labor market because of the low cost associated with terminating temporary workers. In resolving the CreditWatch placement, S&P will evaluate any information it receives regarding the spread of the coronavirus and its effects on EmployBridge's demand, liquidity, and debt leverage. "We could lower our rating on the company if we believe the pandemic will cause its leverage to increase or materially reduce its liquidity," S&P said. "We could remove our ratings from CreditWatch and affirm them once we are more confident about the duration and severity of the pandemic's effects on EmployBridge's demand, operating performance, liquidity, and cash flow. We would need to be confident that the company's revenue will not decline by more than 10%, its debt leverage will remain below 5.5x, and it will maintain sufficient liquidity--including remaining in compliance with its covenant--before we would affirm our rating," S&P said. ENSIGN DRILLING: Moody's Cuts CFR to B3 & Alters Outlook to Neg. ---------------------------------------------------------------- Moody's Investors Service downgraded Ensign Drilling Inc.'s Corporate Family Rating to B3 from B1, Probability of Default Rating to B3-PD from B1-PD, senior unsecured rating to Caa1 from B2 and Speculative Grade Liquidity Rating to SGL-3 from SGL-2. The outlook was changed to negative from stable. "Ensign's rating downgrade reflects its expectation that EBITDA will decline sharply in 2020 as a result of reduced drilling activity from oil and gas producers, combined with the company's need to extend its revolving credit facility due November 2021" commented Moody's Analyst Jonathan Reid. Downgrades: Issuer: Ensign Drilling Inc. Corporate Family Rating, Downgraded to B3 from B1 Probability of Default Rating, Downgraded to B3-PD from B1-PD Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 (LGD5) from B2 (LGD5) Outlook Actions: Issuer: Ensign Drilling Inc. Outlook, Changed To Negative From Stable RATINGS RATIONALE Ensign's credit profile benefits from 1) broad North American diversification in multiple basins and broad international exposure with a significant number of rigs in Australia, the Middle East and Latin America; 2) its expectation that the company will generate free cash flow despite the expected decline in drilling activity; and 3) a high quality drilling rig fleet. Ensign's credit profile is challenged by: 1) expected decline in EBITDA driven by reduced capital spending from oil and gas production companies which will lead to an increase in leverage; and 2) high revolver utilization combined with the need to extend its credit facility beyond the current November 2021 maturity date in a depressed industry environment. Ensign's liquidity is adequate (SGL-3). As of December 31, 2019 Ensign has about C$30 million of cash and approximately C$150 million available under its C$900 million secured revolving credit facility due November 2021. Moody's expects Ensign will generate positive free cash flow in 2020, with the majority of free cash flow being used to pay down revolver borrowings. The company's next significant refinancing requirement is its revolving credit facility, with no other refinancing requirements until April 2024. Moody's believes that the projected decrease in EBITDA could lead to Ensign breaching the financial covenants applicable to its secured revolving credit facility towards the end of 2020. Alternative sources of liquidity are limited principally to the sale of Ensign's existing drilling rigs, and completion and well service rigs, which are largely encumbered. In accordance with Moody's Loss Given Default (LGD) Methodology, the senior unsecured notes are rated Caa1, one notch below the B3 CFR, reflecting the priority ranking of the C$900 mm revolving credit facility in the capital structure. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The OFS sector has been one of the sectors most significantly affected by the shock given its sensitivity to demand and oil prices. More specifically, the weaknesses in Ensign's credit profile have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Ensign remains vulnerable to the outbreak continuing to spread and oil prices remaining weak. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Ensign of the breadth and severity of the oil demand and supply shocks, and the broad deterioration in credit quality it has triggered. Governance factors that were considered in this rating were Ensign's financial policies which have led to high financial leverage highlighted by significant drawings on its revolving credit facility. The company's financial policies balance debtholder and shareholder priorities since the company has no regular dividend, and it balances the use of free cash flow to reduce outstanding debt with share repurchases. The negative outlook reflects Moody's view that Ensign could breach its financial covenants towards the end of 2020 as a result of its increase in leverage and that its credit metrics could deteriorate further if oil and gas producers continue to reduce capital spending. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if EBITDA/Interest is sustained below 1.5x, if Ensign generates sequential negative free cash flow leading to reduced liquidity or if the company is unable to extend the maturity of its revolving credit facility by October 2020. The ratings could be upgraded if Ensign generates sequential improvements in EBITDA in an improving industry environment or if the company is able to reduce refinancing risk by extending the maturity of its revolving credit facility while maintaining adequate liquidity. Ensign is a Calgary, Alberta-based provider of land drilling rigs, well servicing and directional services with operations in major hydrocarbon basins throughout North and South America, the Middle East and Australia. EUROPEAN FOREIGN: Sunshine Buying All Assets for $1.7 Million ------------------------------------------------------------- European Foreign Domestic Auto Repair Centre, Inc., Boca East and Ask Ventures, Inc., ask the U.S. Bankruptcy Court for the Southern District of Florida to authorize the sale of substantially all their assets to Sunshine Holdings Investments of Florida, Inc., for $1.7 million, subject to higher and better offers. The Debtors ask approval of the sale process through which they may expose their Assets, but not the Excluded Assets, to competitive bids, establish bidding procedures, and set various deadlines in order to accomplish the sale. The Assets are listed and described as follows: a. The real property located at 2740 NW 1st Avenue, Boca Raton, FL, 33431 ("Premises") which is wholly owned by ASK. b. The personal property located at the Premises, owned by European, as listed in Schedule B of European's bankruptcy schedules, except for the Excluded Assets. The Premises sits on approximately 1.06 acres of land and consists of a 6,000 square foot (approximate) building, 10 parking spaces, and a vacant area of land. It houses Debtor European’s business operations, which are currently ongoing. Debtor ASK has owned the Premises since June 1993, and subsequently constructed the existing building that houses the auto repair and body shop of Debtor European. As of the filing of the Motion, the Debtors have the following indebtedness, in addition to general unsecured claims: a. Paradise Bank: $1,221,893 plus post-petition legal fees (Secured) b. Legal fees: Approximately $82,500 (Administrative) c. Accounting: Approximately $15,000 (Administrative) d. IRS: $12,138 (Priority) e. PB County Tax $24,292 (Priority) f. State of Florida – Department of Revenue $12,443 (priority) The Assets consist primarily of the real estate described, and also include the personal property typically utilized in an auto repair and body shop business. The Debtors intend to sell the Assets pursuant to the Asset Purchase Agreement, to be entered into between the Debtors and the Successful Bidder. In order to ensure the highest possible recovery for the Debtors' estates, the Debtors propose a competitive Auction of the Assets, as contemplated in the Bidding Procedures. The salient terms of the Bidding Procedures are: a. Bid Deadline: March 31, 2020 at 5:00 p.m. (ET) b. Initial Bid: $1.85 million c. Deposit: $100,000 d. Auction: April 9, 2020 e. Bid Increments: $25,000 f. Closing: April 30, 2020 g. Break-up Fee - $25,000 g. The Assets will be transferred on an "as is" and "where is" basis. The Debtors propose a sale of the Assets through auction, subject to higher and better offers, and free and clear of all liens, claims and encumbrances, with any liens, claims, or encumbrances attaching to the proceeds of the Sale. In addition, given the Debtors' and the Bidders' interest in proceeding expeditiously, the Debtors ask that the Court waives the 14-day stay of the effectiveness of the Sale Approval Order consistent with Rule 6004(h) of the Federal Rules of Bankruptcy Procedure. A copy of the APA is available at https://tinyurl.com/vaq8ppy from PacerMonitor.com free of charge. About European Foreign Domestic Auto Repair Centre and ASK Ventures European Foreign Domestic Auto Repair Centre, Inc. is a company that provides automotive repair and maintenance services. ASK Ventures Inc. is a company primarily engaged in renting and leasing real estate properties. European Foreign Domestic and ASK Ventures sought Chapter 11 protection (Bankr. S.D. Fla. Case Nos. 19-22870 and 19-22872) on Sept. 26, 2019. At the time of the filing, European Foreign Domestic was estimated to have assets of at least $50,000 and liabilities of between $1 million and $10 million. ASK Ventures was estimated to have assets of between $1 million and $10 million and liabilities of the same range. Judge Erik P. Kimball oversees the cases. FurrCohen P.A. is the Debtors' legal counsel. FORM TECHNOLOGIES: S&P Cuts ICR to 'CCC' on Operating Performance ----------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Form Technologies LLC to 'CCC' from 'B-'. At the same time, S&P lowered its issue-level rating on the company's first-lien debt to 'CCC' from 'B-' and its issue-level rating on the company's second-lien debt to 'CCC-' from 'CCC+'. Form Technologies LLC's leverage increased significantly in 2019 due to weak global auto production. "In our opinion, this trend will further worsen in 2020 due to the effects of the coronavirus. We are projecting that global light-vehicle sales will decline 15% in 2020. The auto end market makes up about 40% of Form's sales. We also anticipate a decline in demand within the oil and gas end market, which will further hurt the Signicast segment. In our view, OptiMIM's new programs will continue to be delayed as general spending pulls back. In our view, the lower demand for Form's products could raise adjusted debt to EBITDA to over 10x in 2020," S&P said. The negative outlook reflects at least a one-in-three chance that S&P could lower the rating over the next 12 months due to weak demand for Form's products. The rating agency believes this could result in very high leverage and liquidity issues with respect to the company's covenants and refinancing needs. "We could lower our rating on Form if weaker-than-expected operating performance results in a clearer path to default over the next six months. This could occur if we believe a covenant breach is inevitable and that Form has no prospects to attain a waiver or amendment. We could also lower our rating if Form does not make progress toward refinancing its cash flow revolver due 2021, increasing the likelihood of a potential distressed restructuring default," S&P said. "We could raise the rating on Form if the macroeconomic environment improves such that the company can address near-term liquidity concerns and take steps to address near-term maturities," S&P said. FORMING MACHINING: Moody's Cuts CFR to Caa1, Reviews for Downgrade ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of Forming Machining Industries Holdings, LLC, the legal borrower of the debt facilities of The Atlas Group, including the corporate family rating and probability of default rating to Caa1 and Caa1-PD, from B3 and B3-PD, respectively. Concurrently, Moody's downgraded the first-lien senior secured bank credit facility ratings and the second-lien senior secured term loan rating, to B3 and Caa3, from B2 and Caa2, respectively. The ratings remain on review for downgrade. RATINGS RATIONALE The rating downgrades reflect increased uncertainty surrounding the timing of the resumption of Boeing 737 MAX production in light of the coronavirus outbreak, in particular given the company's sizable exposure to that program. Moody's expects that commercial aerospace end-market pressure will cause Forming Machining's already high leverage to grow further in 2020, with debt/EBITDA likely exceeding 7.0x if there continues to be a prolonged suspension of production. Moreover, Moody's anticipates a weakening of near-term liquidity. The company's comparatively small revenue base and customer concentration make its operating performance and cash flow profile particularly sensitive to Boeing and Spirit's production suspension. The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The aerospace & defense sector has been one of the sectors adversely affected by the shock given its sensitivity to consumer demand and market sentiment. More specifically, the weaknesses in Forming Machining's liquidity and underlying credit profile, including its customer concentration, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its actions reflect the impact on Forming Machining of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Issuer: Forming Machining Industries Holdings, LLC Corporate Family Rating, downgraded to Caa1 from B3, remains on review for further downgrade Probability of Default Rating, downgraded to Caa1-PD from B3-PD, remains on review for further downgrade $50 million senior secured first-lien revolving credit facility due 2023, downgraded to B3 (LGD3) from B2 (LGD3), remains on review for further downgrade $260 million senior secured first-lien term loan due 2025, downgraded to B3 (LGD3) from B2 (LGD3), remains on review for further downgrade $60 million senior secured second-lien term loan due 2026, downgraded to Caa3 (LGD6) from Caa2 (LGD6), remains on review for further downgrade Outlook, remains Ratings Under Review The Caa1 CFR reflects the company's modest revenue base (approximately $300 million) characterized by a high degree of customer and aircraft platform concentration, subjecting it to potential meaningful loss of earnings in 2020 due to the production suspension of the Boeing 737 MAX ("MAX") and related increased uncertainty as to production resumption. The lost MAX earnings will likely reverse progress made throughout 2019 in deleveraging and realizing acquisition synergies emanating from the combination of Atlas with FMI Inc. Debt/EBITDA, already high at 5.7x as of September 2019, will likely rise to levels exceeding 8.0x in 2020, depending on how long the production suspension endures. This will also have a negative effect on liquidity as negative free cash flow that will likely ensue during 2020 will require the company to rely on revolver borrowings to meet operating needs. At the same time, the company benefits from meaningful strides to further diversify its business, reflected in the composition of its new business awards including in the area of defense and other end-markets. Importantly, the company has sole-source content on aerospace platforms across the commercial aerospace, business jet and defense markets. Forming Machining's weak liquidity profile is characterized by Moody's expectation that the company will increasingly rely on its revolving credit facility due to an expected weaker earnings profile in 2020 that will likely translate to negative free cash flow. In addition, current comfortable covenant headroom is expected to diminish throughout the year. All ratings remain on review for downgrade. The review will continue to focus on (1) liquidity risk, including the sufficiency of liquidity sources to cover potential cash shortfalls due to the financial impact of the suspension in production of Forming Machining's most important aerospace platform, and the forward earnings and cash flow profile along with the company's ability to remain compliant with financial maintenance covenants; (2) the expected production rate of the MAX and other commercial platforms during 2020 and beyond; (3) the duration of the shutdown and the likely timing of the ungrounding of the 737 MAX by various regulators; and (4) the resilience of Forming Machining's supply chain that will be needed to maintain the health of the same -- by Spirit or otherwise -- both during the shut-down period and when production and the planned rate ramp-up resume; and (5) the likelihood and form of support that the company might receive from its OEM customers and/or the US government. From a corporate governance perspective, Moody's notes that the company has a high leverage profile, reflecting its private equity ownership. Event risk persists in the form of possible future dividends to the sponsor or transactions including potential acquisitions that sustain an elevated leverage profile. The principal methodology used in these ratings was Aerospace and Defense Industry published in March 2018. Factors that would lead to an upgrade or downgrade of the ratings: The company's ratings could be downgraded if liquidity risk is expected to further weaken with lack of revolver access and meaningful expected negative free cash flow of $15 million or above, or if leverage is expected to increase beyond 9.0x and EBITA/interest is expected to weaken to under 0.5x. The loss of a major customer with volume not replaced and/or acquisition integration challenges could also drive negative ratings pressure. Conversely, the ratings could be upgraded if the trajectory of the aerospace & defense end-markets improves, with production of the Boeing 737 MAX expected to resume earlier than mid-year, or if the company receives financial support from its OEM customers and/or the US government. In addition, meaningful revenue growth through the acquisition of new customers and/or contract awards, accompanied by positive free cash flow generation such that debt/EBITDA improves to less than 7.0 times and EBITA/interest improves to greater than 1.0 time on a sustained basis, could also pressure ratings upward. FRONTERA ENERGY: S&P Downgrades ICR to 'B+'; Outlook Negative ------------------------------------------------------------- S&P Global Ratings lowered its issuer credit and issue-level ratings on of Canada-based oil and gas producer Frontera Energy Corp. to 'B+' from 'BB-'. The crash in oil prices will erode the company's credit metrics. S&P's latest revision to its crude oil and gas price assumptions reflects the price war between Saudi Arabia and Russia as well as a likely massive drop in demand due to COVID-19. The revised price deck includes an average annual price assumption for Brent crude oil of $30 per barrel (versus $40/bbl) for 2020 and $50/bbl (versus $50/bbl) for 2021. S&P expects this to weaken Frontera's credit metrics, leading to debt to EBITDA close to 3.0X, funds from operations (FFO) to debt of 20%-30%, and free operating cash flow (FOCF) to debt below 5%. These metrics deviate substantially from S&P's previous expectations. An expected shift in Frontera´s operating strategy could delay its growth prospects and rise in EBITDA. While the company's profitability largely depends on oil prices, S&P believes that the current economic turndown would also erode Frontera's growth prospects and cause its volume sales to drop about 15% in 2020, a trend that could extend into 2021. S&P expects the company to reduce production to 20.5 million barrels of oil equivalent (mboe) for 2020 and to 15.9 mboe in 2021, mostly due to cuts in exploratory and non-core well drilling activities. Even though Frontera is likely to decrease some operating costs, such as in transportation and production, it would still generate EBITDA in 2020 that's about half the total in 2019. "In our view, the uncertainty over the duration of these market conditions could prevent a recovery in Frontera's operations in the upcoming months. We believe that even though its contraction measures would preserve the company's liquidity, the lower expansion and production investments could curtail the revamp in operations in the future," S&P said. "Frontera's hedging strategy and lower capex should ease the impact of a lower price deck on cash flows, while we continue assessing its liquidity as adequate. As of Feb. 29, 2020, Frontera managed to hedge approximately 43% of total production for this year through multiple financial instruments at a strike price between $48.5 and $55.0 per barrel. As of this report's date, we don't expect any hedging strategy for 2021. Moreover, we expect the company to cut approximately 50% of its capex, by slashing expansion investments and drilling activities in response to grim market conditions. Finally, the company ties its dividend payments to quarterly oil prices, for which, if the price falls below $60, we do not expect any dividend payments. We expect this strategy to partly compensate for wide cash loses during 2020 because we also estimate EBITDA will shrink about 50%," S&P said. The negative outlook reflects S&P's expectation that the current economic downturn and a possible delay in crude oil price recovery could impair Frontera's EBITDA for the next 12-18 months, leading to debt to EBITDA above 3x. "We could lower the ratings in the next 12-18 months if Frontera's operations continue drifting from our expectations, leading to debt to EBITDA above 3x and FFO to debt below 30%. This could occur if Frontera's production deviates significantly from our current projections, or if oil prices remain below our current price deck for a sustained period and the company is unable to reduce costs, resulting in lower EBITDA," S&P said. "We could revise the outlook to stable in the next 12-18 months if Frontera is able to absorb the economic downturn and recover its production, while maintaining average debt to EBITDA below 3x and FFO to debt above 30%," the rating agency said. G-III APPAREL: Moody's Alters Outlook on Ba3 CFR to Negative ------------------------------------------------------------ Moody's Investors Service affirmed G-III Apparel Group, Ltd.'s ratings, including its Ba3 corporate family rating, Ba3-PD probability of default rating, and Ba3 senior secured term loan rating. Its speculative grade liquidity rating was downgraded to SGL-3 from SGL-2. The rating outlook was changed to negative from stable. The outlook change to negative reflects the risk that a prolonged downturn caused by the coronavirus will pressure the company's profitability and credit metrics over the near-to-intermediate term. The rapid spread of the virus has led to unprecedented closures of both G-III's owned retail stores and many of those owned by its department store partners. However, the affirmation reflects the company's currently solid credit metrics and actions it is taking to reduce costs and preserve cash. The downgrade to SGL-3 reflects Moody's expectation for reduced earnings and free cash flow in fiscal 2021, and the reduced revolver capacity related to the recent $500.0 million in aggregate borrowing under its $650 million asset based revolving credit facility which was used to augment its balance sheet cash. Downgrades: Issuer: G-III Apparel Group, Ltd. Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Outlook Actions: Issuer: G-III Apparel Group, Ltd. Outlook, Changed To Negative From Stable Affirmations: Issuer: G-III Apparel Group, Ltd. Probability of Default Rating, Affirmed Ba3-PD Corporate Family Rating, Affirmed Ba3 Senior Secured Bank Credit Facility, Affirmed Ba3 (LGD4) RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The apparel sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in G-III's credit profile, including its exposure to discretionary consumer spending have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and G-III remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on G-III of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. G-III 's Ba3 CFR reflects its solid market position, well known brands, broad product offering and track record of growth, both organically and through new licenses and acquisitions. The December 2016 acquisition of Donna Karan expanded the company's portfolio of owned brands and provided significant profitable growth opportunities. The rating is supported by governance considerations, specifically a conservative leverage policy that targets debt reduction and maintaining moderate leverage. As of January 31, 2020, lease-adjusted debt-to-EBITDAR was less than 2.5 times, having improved significantly since the acquisition of Donna Karan due to both earnings growth and debt reduction. Liquidity is adequate, supported by $197 million of balance sheet cash that was recently boosted by $500 million in aggregate revolver borrowing. G-III's credit profile is constrained by the company's ongoing reliance on licensed brands for more half of its sales, and the relatively short terms of contracts within the licensed portfolio. Calvin Klein, its largest licensed brand and longest current contract, expires in December 2023. In addition, as an apparel wholesaler/retailer, G-III's business risk is high due to the potential for performance volatility related to fashion risk or changes in consumer spending, and significant wholesale customer concentration. While significantly reduced over the past few years, sourcing concentration from China remains relatively high. Thus recent tariff increases on products sourced in China and sold into the United States will modestly increase costs in fiscal 2021. In addition, execution risk is also high as the company works to address underperformance in its Bass and Wilson's retail businesses and drive wholesale growth in a challenging environment. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if operating performance materially declines, if liquidity were to deteriorate through increased revolver borrowing or negative free cash flow, or if financial policy became more aggressive, such as through large debt-financed acquisitions. Failure to renew major licenses or sustainably reduce leverage ahead of major license expirations could also lead to a ratings downgrade. Specific metrics include average lease-adjusted debt/EBITDA sustained above 4.5 times or EBITA/interest expense below 2.5 times. The ratings could be upgraded over time if the company sustainably expands revenue and EBITA margins, and maintains conservative financial policies. Quantitatively, an upgrade would require average lease-adjusted debt/EBITDA sustained below 3.5 times and EBITA/interest expense above 3.5 times. G-III designs, sources and markets apparel and accessories under owned, licensed and private label brands. G-III's owned brands include DKNY, Donna Karan, Vilebrequin, G. H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. G-III has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi's and Dockers brands among others. The company also operates retail stores under the DKNY, Wilsons Leather, G. H. Bass, Vilebrequin, Calvin Klein Performance and Karl Lagerfeld Paris names. Revenue for the twelve month period ended July 31, 2018 approached $3 billion. GARTNER INC: S&P Alters Outlook to Negative, Affirms 'BB' ICR ------------------------------------------------------------- S&P Global Ratings affirmed its ratings including its 'BB' issuer-credit rating on Gartner Inc. At the same time, S&P has revised the outlook to negative from stable. S&P acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak between June and August, and S&P is using this assumption in assessing the economic and credit implications. S&P believes measures to contain COVID-19 have pushed the global economy into recession and could cause a surge of defaults among nonfinancial corporate borrowers. As the situation evolves, S&P will update its assumptions and estimates accordingly. Cancelled conferences due to COVID-19 and overall economic and operating challenges could cause leverage to rise above 4x The outlook revision reflects S&P Global Ratings' expectation that Gartner Inc.'s operating performance, particularly in its conferences segment, will be materially impaired by the company's announced conference cancellations until August 2020 due to coronavirus (COVID-19) containment measures. Gartner's adjusted leverage will temporarily rise above S&P's downside threshold of 4x for its 'BB' rating. The increase in leverage will likely be driven by a combination of the loss of approximately $146 million in EBITDA as indicated by the company due to conference cancellations, in addition to the potential loss of research and consulting business due to a challenging economic environment and the inability for its sales force to travel as various countries and states impose social distancing requirements. S&P expects COVID-19 containment measures will likely lead to a global recession this year, with 2020 global GDP rising just 1.0%-1.5% and risks remain firmly on the downside; however, the company's plan to reduce costs in excess of $200 million in 2020 should limit the overall impact on EBITDA and leverage. The negative outlook reflects the potential for Gartner's leverage to increase and stay above 4x for a prolonged period due to the downside risks stemming from COVID-19, primarily in regard to the company's conferences segment, as well as its consulting and research segments. "We could lower the rating if we expected that Gartner's leverage would increase and remain above 4x on a sustained basis. This would likely result from a prolonged and greater-than-expected impact on global economic growth as well as the company's business from COVID-19 such that the company experienced negative growth in its research segment. In addition, a more aggressive financial policy prioritizing share repurchases or acquisitions, slowing a return of leverage below 4x, could also cause a downgrade," S&P said. "We could revise the outlook to stable if we expected that the company's cost-reduction measures and evidence of continued stability in its research and consulting segments would sufficiently offset the impact on its business from COVID-19 such that leverage would either remain below 4x or quickly return below 4x following an increase in leverage due to the pandemic. A curtailment in the duration, severity, and spread of COVID-19 such that the impact on the global economy and the company's business were less than our expectation could also cause us to revise our outlook to stable," the rating agency said. GEORGE S. BASHEN: Greenranger Buying Houston Homestead for $850K ---------------------------------------------------------------- George Steven Bashen asks the U.S. Bankruptcy Court for the Southern District of Texas to authorize the short sale of his homestead located at 622 Voss Rd., Houston, Texas to Greenranger, LLC for $850,000, pursuant their One to Four Family Residential Contract (Resale). Objections, if any, must be filed no later than 21 days from the date the Motion was served. The sale is a short sale approved by The Bank of New York Mellon c/o Carrington Mortgage Services, LLC, the mortgagee and servicer. All settlement costs charged to the Seller are being assumed by the mortgagee. There will be no out-of-pocket cost to the Debtor. The Debtor believes that the sale is in the best interest of the Debtor and his creditors at large. The sale of the property is $850,000, which is a good price. The sale is to be free and clear of all liens with all such liens to be in priority order against the net proceeds. The property taxes, broker fees, title policy costs, and all other settlement costs charged to Seller are to be paid according to the Settlement Statement, with all remaining funds to be paid to the mortgagee. All lienholders have consented to the sale. The IRS has consented to the sale. Frost Bank and Unity National Bank have both executed partial releases of lien. The Debtor filed an amended Schedule C on Jan. 29, 2020 to make certain there was no mistake that the property is his homestead. The amended exemption will be allowed on Feb. 29, 2020. The Debtor asks that the 14-day stay pursuant to Bankruptcy Rule 6004(h) not apply, and the relief granted be effective immediately upon entry of the order approving the sale. A copy of the Contract is available at https://tinyurl.com/yx5kc7mr from PacerMonitor.com free of charge. The bankruptcy case is In re George Steven Bashen (Bankr. S.D. Tex. Case No. 18-37391-H1-11). Counsel for the Debtor: Margaret M. McClure, Esq. 909 Fannin, Suite 3810 Houston, Texas 77010 Telephone: (713) 659-1333 Facsimile: (713) 658-0334 GLASS MOUNTAIN: S&P Lowers ICR to 'B-' on Expected Higher Leverage ------------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on Glass Mountain Pipeline, LLC to 'B-' from 'B' to reflect higher expected leverage stemming from a reduction in throughput volumes and increased volatility amid depressed energy commodity prices in 2020. At the same time, S&P is lowering its issue-level rating on the company's $300 million term loan B facility to 'B-' from 'B+' and revising its recovery rating to '3' from '2'. The '3' recovery rating indicates S&P's expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in the event of a payment default. "The downgrade reflects the downward revision of our energy commodity price deck. We now assume West Texas Intermediate (WTI) prices of $25 per barrel (bbl) in 2020 and $45 per bbl in 2021, which we anticipate will result in lower throughput volumes and adjusted EBITDA for Glass Mountain Pipeline, LLC. We think Glass Mountain will face a challenging market environment over the next 12 months as exploration and production companies revise their capital budgets and production volumes. We expect Glass Mountain to have an adjusted debt to EBITDA of above 7.5x in 2020. Positively, we project that the company will have sufficient headroom over its financial covenant and adequate liquidity over the next 12 months, underpinned by its flexible growth capital expenditures (capex) and support from its sponsors," S&P said. The negative outlook reflects S&P's expectation of heightened volumetric risk and elevated leverage metrics in 2020 due to the impact of lower commodity prices. It expects an adjusted debt-to-EBITDA ratio of above 7.5x through 2020, resulting from lower expected throughput volumes across the SCOOP and STACK plays. "We could lower our rating on Glass Mountain if the company's capital structure becomes unsustainable and liquidity deterioration threatens its ability to service its debt. This could happen if depressed commodity prices result in continued underperformance of throughput volumes," S&P said. "We could revise the outlook to stable if Glass Mountain maintains a debt-to-EBITDA ratio of below 6.5x and increases throughput volumes," the rating agency said. GLOBALTRANZ ENTERPRISES: Moody's Reviews B3 CFR for Downgrade ------------------------------------------------------------- Moody's Investors Service placed all of its ratings for GlobalTranz Enterprises, Inc. on review for downgrade, including the B3 corporate family rating, the B3-PD probability of default rating and B2 rating on the senior secured bank credit facility. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The company is exposed to sectors that will be significantly affected by the shock, given their sensitivity to consumer demand and sentiment, general economic and industrial activity. More specifically, GTZ's credit profile, including its exposure to the cyclicality of transportation sector and moderating freight demand and pricing conditions, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. GTZ also remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the expected impact on GTZ of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. In its review, Moody's will consider (i) the company's liquidity position, (ii) evolving market conditions, including the magnitude of the impact of the coronavirus outbreak on freight volumes, (iii) the company's ability to adapt its cost structure and investments to potentially rapid declines in demand, and (iv) the potential to restore credit metrics when economic activity recovers. GTZ's ratings, including the B3 CFR and B2 senior secured rating, reflects its position as a third party logistics (3PL) provider, with growing scale but also high financial leverage. Moody's expects continued growth by acquisition to build out scale, which limits deleveraging prospects. There are considerable competitive pressures in the 3PL market, and GlobalTranz has expanded aggressively to increasethe scope of its services especially around freight brokerage. The asset light nature of the business limits cash strains on asset purchases, and does provide some flexibility around operating costs. Transportation management could provide some stability to revenue. The company plays an important role in the less-than-truckload (LTL) brokerage market to small and medium enterprises (SME), yet the SME market could be hit hard during the much slower market conditions expected. Moody's took the following actions on GlobalTranz Enterprises, Inc.: Corporate Family Rating, Placed on Review for Downgrade, currently B3 Probability of Default Rating, Placed on Review for Downgrade, currently B3-PD Senior Secured Bank Credit Facility, Placed on Review for Downgrade, currently B2 (LGD3) Outlook, Changed to Ratings Under Review from Stable The principal methodology used in these ratings was Surface Transportation and Logistics published in May 2019. GlobalTranz Enterprises, Inc. based in Scottsdale, Arizona, is a non-asset based provider of third-party logistics services specializing in truckload (TL), less-than truck-load (LTL), supply chain logistics, and warehousing services. Revenues for the last twelve months ended September 30, 2019, were approximately $1.36 billion. GOOD NOODLES: May 5 Plan & Disclosure Hearing Set ------------------------------------------------- On March 9, 2020, debtor Good Noodles Inc. d/b/a Sfoglini filed with the U.S. Bankruptcy Court for the Southern District of New York a Liquidating Chapter 11 Plan and Disclosure Statement. On March 19, 2020, Judge Cecelia G. Morris conditionally approved the Disclosure Statement and established the following dates and deadlines: * May 5, 2020, at 11:00 a.m. before the Honorable Cecelia G. Morris, Chief United States Bankruptcy Judge, at the United States Bankruptcy Court, 355 Main Street, Poughkeepsie, New York 12601 is the hearing to consider approval of the Disclosure Statement on a final basis and consider confirmation of the Plan. * April 24, 2020, at 5:00 p.m., is the deadline for ballots for accepting or rejecting the Plan. * April 27, 2020, is the deadline to file a voting tabulation report. * April 28, 2020 is fixed as the last date for filing and serving any written objections to final approval of the Disclosure Statement and confirmation of the Plan. A full-text copy of the order dated March 19, 2020, is available at https://tinyurl.com/yx3dj78b from PacerMonitor at no charge. About Good Noodles Good Noodles Inc., d/b/a Sfoglini LLC, is a producer of classic Italian style pasta made with organic grains. Good Noodles sought Chapter 11 protection (Bankr. S.D.N.Y. Case No. 19-36441) in Poughkeepsie, New York, on Sept. 4, 2019. Judge Cecelia G. Morris administers the Debtor's case. In the petition signed by Scott Ketchum, president, the Debtor was estimated to have $500,000 to $1 million in assets, and $1 million to $10 million in liabilities. KIRBY AISNER & CURLEY LLP is the Debtor's counsel. GRAN TIERRA: S&P Downgrades ICR to 'B' on Weaker Credit Metrics --------------------------------------------------------------- S&P Global Ratings lowered its issuer credit and issue-level ratings on Canada-based oil and gas producer Gran Tierra Energy Inc. (GTE) to 'B' from 'B+'. The fall in oil prices will compromise GTE's credit metrics. S&P's latest revision to its crude oil and gas price assumptions reflects the price war between Saudi Arabia and Russia as well as a likely massive drop in demand due to COVID-19. The revised price deck includes an average annual price assumption for Brent crude oil of $30 per barrel (versus $40/bbl) for 2020 and $50/bbl (versus $50/bbl) for 2021. S&P believes GTE's leverage metrics could sharply fall below its previous expectations, leading to debt to EBITDA above 5.0x, funds from operations (FFO) to debt below 20.0%, and free operating cash flow to debt below 5.0%. The current economic downturn likely will prompt GTE to reduce operating costs and could delay growth prospects. Oil prices have a significant impact on the company's profitability. In the event of an economic downturn, oil and gas companies tend to contract production activities, which leads to a decrease in EBITDA generation. "We expect GTE to reduce production 19.0% for 2020, a trend that could taint production for 2021. Our assumptions include total production of 10.2 million barrels of oil equivalent (mboe) for 2020 and 13.3 million mboe in 2021, mostly because of cuts in exploratory and non-core well drilling activities, such as in Ecuador. Even though we expect the company to reduce production and transportation costs, low oil prices would still lead to a 66.3% drop in EBITDA generation in 2020 compared with 2019," S&P said. "In our view, uncertainty about the duration of these market conditions could prompt the company to slow down its growth prospects. We believe that even though its contraction measures would preserve the company's liquidity, the lower expansion and production investments could curtail the revamp in operations in the future," S&P said. "GTE's capex cuts and non-debt maturities should stem cash loses during 2020. We continue assessing liquidity as strong. We expect the company to cut approximately 70% of its capex by putting on hold expansion investments and drilling activities to offset the drop in operating cash generation. The company maintains $118 million in undrawn committed credit lines, which could affect its liquidity position in a stressed scenario. We will continue monitoring the company's liquidity in the next 12 months, as its reduced hedging strategy on oil prices could lead to wide cash loses," S&P said. The negative outlook reflects S&P's expectation that the economic downturn and a possible delay in crude oil price recovery could limit GTE's EBITDA generation for the next 12-18 months. "We could lower the ratings in the next 12-18 months if GTE continues drifting from our expectations because of adverse economic conditions, leading to debt to EBITDA above 5.0x and FFO to debt below 30.0%. This could occur if GTE's production deviates significantly from our current projections, or if oil prices remain below our current price deck for a sustained period and the company is unable to reduce costs, resulting in lower EBITDA generation," S&P said. "We could revise the outlook to stable in the next 12-18 months if GTE is able to absorb the economic downturn, reflected by lower crude oil prices, and indicates a recovery in production volumes, while maintaining average debt to EBITDA below 3.0x and FFO to debt above 30.0%," the rating agency said. GRANITE LAKES: U.S. Trustee Unable to Appoint Committee ------------------------------------------------------- The Office of the U.S. Trustee on April 1 disclosed in a court filing that no official committee of unsecured creditors has been appointed in the Chapter 11 case of Granite Lakes, LLC. About Granite Lakes Granite Lakes, LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Wash. Case No. 20-10635) on Feb. 27, 2020. At the time of the filing, the Debtor had estimated assets of between $10 million and $50 million and liabilities of between $500,000 and $1 million. Judge Christopher M. Alston oversees the case. The Debtor tapped Law Office of James E. Dickmeyer PC as its legal counsel. GREEN GLOBAL: Plan of Reorganization Confirmed by Judge ------------------------------------------------------- Judge Thomas P. Agresti of the U.S. Bankruptcy Court for the Western District of Pennsylvania ordered that the Disclosure Statement filed by debtor Green Global, LLC, is approved. The Plan filed by the Debtor including any stipulations and other amendments approved by the Court at or prior to the confirmation hearing which are incorporated by reference into the Plan as if fully set forth is confirmed. As reported in the Troubled Company Reporter, debtor Green Global, LLC, filed a Second Amended Plan and a Disclosure Statement. The Debtor will pay all creditors 100% of their allowed claims based on the revenue to be generated from the sale of goods including, but not limited to, the sale of goods to American International Resources, Inc. The Debtor's Plan calls for payment to creditors over a period of 18 months. A full-text copy of the Second Amended Disclosure Statement dated Dec. 19, 2019, is available at https://tinyurl.com/vvcs6nb from PacerMonitor.com at no charge. A full-text copy of the order dated March 17, 2020, is available at https://tinyurl.com/ttl5dbz from PacerMonitor at no charge. About Green Global Based in Southwest, Pennsylvania, Green Global, LLC, filed a voluntary Chapter 11 Petition (Bankr. W.D. Penn. Case No. 14-20131) on Jan. 10, 2014. At the time of filing, the Debtor was estimated to have assets are $100,000 to $500,000, and the estimated liabilities are $1 million to $10 million. The case is assigned to Hon. Thomas P. Agresti. Steidl and Steinberg, P.C., led by Christopher M. Frye, is the Debtor's counsel. HANESBRANDS INC: Moody's Alters Outlook on Ba1 CFR to Negative -------------------------------------------------------------- Moody's Investors Service affirmed Hanesbrands, Inc.'s ratings, including it including its Ba1 corporate family rating, Ba1-PD probability of default rating, Baa3 on its secured credit facilities, Ba2 on its unsecured notes. Its SGL-2 speculative grade liquidity rating is unchanged. Moody's also affirmed HBI Australia Acquisition Co. Pty Ltd's Baa2 secured debt rating, and Hanesbrands Finance Luxembourg S.C.A's Ba1 unsecured notes. The rating outlook for Hanesbrands, Inc. was changed to negative from stable. The outlook change to negative reflects the uncertainty with regards to the duration and severity of the coronavirus spread, and the impact of retail store closures and prolonged reductions consumer spending on the company's overall earnings and credit metrics. The affirmation reflects Hanesbrands significant global scale, well-known brands and leading share in the inner wear product category, with a significant portion of the company's sales derived from more stable subsectors of apparel, such as basic t-shirts, underwear and socks. Hanesbrands' liquidity is good, supported by approximately $1 billion of cash on hand including a recent revolver borrowing used to augment cash as a precautionary measure. Outlook Actions: Issuer: Hanesbrands Finance Luxembourg S.C.A Outlook, Changed To Negative From No Outlook Issuer: Hanesbrands, Inc. Outlook, Changed To Negative From Stable Issuer: HBI Australia Acquisition Co. Pty Ltd Outlook, Changed To Negative From No Outlook Affirmations: Issuer: Hanesbrands Finance Luxembourg S.C.A Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 (LGD4) Issuer: Hanesbrands, Inc. Probability of Default Rating, Affirmed Ba1-PD Corporate Family Rating, Affirmed Ba1 Senior Secured Bank Credit Facility, Affirmed Baa3 (LGD2) Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD4) Issuer: HBI Australia Acquisition Co. Pty Ltd Senior Secured Bank Credit Facility, Affirmed Baa2 (LGD2) RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The apparel sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Hanesbrands' credit profile, including its exposure to widespread store closures and discretionary consumer spending have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Hanesbrands remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Hanesbrands of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Hanesbrands' Ba1 CFR reflects its significant scale in the global apparel industry along with the company's well-known brands and leading share in the inner wear product category. Also considered are Hanesbrands' double digit operating margins that are a result of product innovation, a low cost supply chain, and the company's ability to successfully leverage its brands. The rating reflects governance risks, including high debt and leverage stemming from debt-financed acquisitions and significant share-repurchases made prior to fiscal 2018; although, the company has since focused on significant debt reduction and leverage improvement. Also considered is Hanesbrands' significant, but improving, customer concentration with two of its largest customers accounting for 25% of its 2019 total net sales, and its exposure to volatile input costs such as cotton, which can have a meaningful and unfavorable impact on earnings and cash flows. Factors that would lead to an upgrade or downgrade of the ratings: Ratings could be downgraded if operating performance deteriorates as a result of negative trends in revenues or margin erosion, or a return to more aggressive financial policies. Quantitative metrics include lease-adjusted det/EBITDA sustained above 4.0x. Rating improvement is limited by the company's current financial policy that targets credit metrics at a level too high for an investment grade rating. A higher rating would require that Hanesbrands demonstrate the ability and willingness to maintain debt/EBITDA (lease-adjusted, as per its calculations) below 3.0 times as well as materially reduce its use of secured debt financing. Headquartered in Winston-Salem, NC, Hanesbrands is a manufacturer and distributor of basic apparel products under brands that include: Hanes, Champion, DIM, Maidenform, Bali, Bonds and Playtex, among others. Annual revenue approaches $7 billion. HI-CRUSH INC: Moody's Cuts CFR to Caa2 & Sr. Unsec. Rating to Caa3 ------------------------------------------------------------------ Moody's Investors Service downgraded Hi-Crush Inc.'s Corporate Family Rating to Caa2 from Caa1, Probability of Default Rating to Caa2-PD from Caa1-PD, and the rating on the company's senior unsecured notes to Caa3 from Caa2. The Speculative Grade Liquidity Rating was maintained at SGL-4. The outlook remains negative. "With the sudden and severe decline in oil & gas prices, Moody's expects a significant decline in demand and prices of frac sand to negatively impact Hi-Crush's profitability, credit metrics and liquidity," said Emile El Nems, a Moody's VP-Senior Analyst. "Hi-Crush's low profitability and elevated leverage make the company highly susceptible to a cyclical downturn in the global economy." This downgrade reflects Moody's expectations that in 2020, Hi-Crush's liquidity, profitability and key credit metrics will deteriorate further due to ongoing volatility in the oil and gas end market and the persistent weakness in the frac sand industry. Despite recent mine closures and production cuts, Moody's, does not expect a significant recovery in frac sand price anytime soon. Downgrades: Issuer: Hi-Crush Inc. Probability of Default Rating, Downgraded to Caa2-PD from Caa1-PD Corporate Family Rating, Downgraded to Caa2 from Caa1 Senior Unsecured Regular Bond/Debenture, Downgraded to Caa3 (LGD4) from Caa2 (LGD4) Outlook Actions: Issuer: Hi-Crush Inc. Outlook, Remains Negative RATINGS RATIONALE Hi-Crush's Caa2 CFR reflects rapidly increasing leverage, lack of free cash flow, weak liquidity and high exposure to Northern White Sand. In addition, the rating reflects the risk associated with the company's significant exposure to the volatile oil & gas industry. The weakness in Hi-Crush's credit profile has left it vulnerable to shifts in market sentiment. Therefore, the rating reflects Moody's view that prolonged pressure on the company's operating results jeopardizes the sustainability of its capital structure and increases the likelihood of the need to restructure. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook and falling oil prices are creating a severe and extensive credit shock across the energy sector, a key end market for Hi-Crush. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. At the same time, the rating takes into consideration the company's market position as one of the four largest producers of frac sand in the US, by mining capacity, and its extensive logistics capabilities. Further, the company has no significant debt maturities until 2026, when its $450 million senior unsecured notes mature. For year-end 2020, Moody's expects debt-to-EBITDA to increase to 8.5x and EBIT-to-Interest expense to decline to -0.3x. The negative outlook reflects the uncertainty surrounding the frac sand industry and the difficulty in predicting the range and volatility of earnings should the industry downturn persist longer than anticipated. Under such a scenario, Moody's believes that Hi-Crush may not have the necessary liquidity to run its business effectively. The rating outlook could be returned to stable if the company improves its liquidity profile and the oil & gas end market stabilizes. Hi-Crush's Speculative Grade Liquidity rating of SGL-4 reflects the company's weak liquidity position due to on-going negative free cash flow and its small cash position relative to the size of its operations. At December 31, 2019, Hi-Crush had $58 million in cash and $43.9 million in availability under its ABL credit facility expiring in 2023. Although Hi-Crush is currently in compliance with covenants contained in the ABL credit facility, the volatility of its earning may limit the amount it could access, further constraining is liquidity position. The ABL is governed by a springing fixed charge ratio of 1.0x, tested only when excess availability is less than (1) the greater of $12.5 million, or (2) 12.5% of the lesser of the borrowing base or commitment. Factors that would lead to an upgrade or downgrade of the ratings: The rating could be upgraded if: - The company improves its free cash flow generation and maintains a solid liquidity profile - Oil and natural gas end markets stabilize The rating could be downgraded if: - The company is unable to improve its liquidity profile - The potential losses for lenders or the probability of restructuring increases The principal methodology used in these ratings was Building Materials published in May 2019. Based in Houston, Texas, Hi-Crush is an integrated producer, transporter, marketer and distributor of high-quality commercial silica, which is a specialized mineral used as a proppant to recover hydrocarbons from oil and natural gas wells. Hi-Crush owns, operates and develops sand reserves and related excavation, processing and distribution facilities. HIGHPOINT RESOURCES: S&P Downgrades ICR to CCC+ on Liquidity Risks ------------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on HighPoint Resources Corp. to 'CCC+' from 'B'. S&P lowered the rating on the unsecured notes to 'CCC' from 'B' and revised its recovery rating on the notes to '5' from '3'. "In our opinion, there is the potential for HighPoint's liquidity to weaken despite being well hedged in 2020. The company recently announced its hedged position in 2020 covers approximately 90% of anticipated 2020 oil volumes at an average weighted West Texas Intermediate (WTI) price of approximately $58 per barrel with an estimated mark-to-market value of $225 million at current strip prices, which will provide for some cash flow certainty. However, we think, given current market conditions, there is a chance the company's borrowing base on its revolving credit facility could be cut in the spring, which will further constrain liquidity and drilling and completion activity," S&P said. The negative outlook reflects S&P's expectation for weakening liquidity, resulting from lower hydrocarbon prices despite the company being well hedged through 2020. Due to lower bank price decks and the company's announcement that it will defer drilling and completion activity in the latter half of 2020, the company's borrowing base has the potential to be reduced at its spring redetermination, further reducing liquidity. Additionally, S&P thinks there is increased risk of the company executing a transaction the rating agency could view as distressed given current capital market conditions and the company's upcoming 2022 unsecured debt maturity. "We could lower the rating if HighPoint's liquidity weakens further or if the company announces a transaction we would view as distressed. Such a scenario is possible if HighPoint outspends cash flow or the company's borrowing base is cut," S&P said. "We could revise the outlook to stable if HighPoint's liquidity improved and it becomes more likely that it is able to address its 2022 maturity while maintaining adequate liquidity. We could also revise the outlook if we no longer viewed the company as likely to execute a transaction t we would view as distressed. This would likely occur if hydrocarbon prices increased and access to capital markets improved," S&P said. HILL & HILL MAINTENANCE: Court Confirms Modified Plan ----------------------------------------------------- Judge Cynthia A. Norton has ordered that the Combined Disclosure Statement is approved and the Plan filed by Hill & Hill Maintenance & Excavation, Inc., on Jan. 9, 2020, is confirmed subject to the following clarified or modified treatments and covenants and representations incorporated into to be a part of the Plan: A. Modified Plan Treatment of Class 2 Secured Claim of Freedom Bank (Note No. ending 7037 – Truck and Equipment Note). Class 2 will be deemed amended by deleting the text of the identified Class and substituting the following: Debtor will reaffirm the obligation represented by the Loan documents as modified herein to be paid in full through quarterly installments of principal and interest payments over a 48-month period. The rate of interest will be 6 percent per annum with quarterly payments to be made on the 15th day of the months of January, April, July and October and continuing on the same day of each calendar quarter described until all quarterly payments are made. The first quarterly payment will be made on or before April 15, 2020. Freedom Bank will retain its lien on the 2007 Dump Truck, Dump bed, Hitachi Excavator, and shall retain the right to inspect the collateral upon reasonable notice. B. Modified Plan Treatment of Class 3 Secured Claim of Freedom Bank (Note No. ending 8004 – The Shop Note). Class 3 will be deemed amended by deleting the text of the identified Class and substituting the following: Debtor will reaffirm the obligation represented by the Loan Documents as modified herein to be paid in full through quarterly installments of principal and interest payments with quarterly payments of principal and interest to be made over a 48-month period. The rate of interest will be 6 percent per annum. The first quarterly payment will be made on or before April 15, 2020. Freedom Bank will retain its lien on the Shop Building until its claim is paid in full. Freedom Bank will also retain the right to enter upon and inspect the collateral upon reasonable notice. C. Modified Plan Treatment of Class 4 Secured Claim of Freedom Bank (Note No. Ending 3001 - The Jeff Hill Note). Class 4 will be deemed amended by deleting the text of the identified Class and substituting the following: The current maturity date of the Jeff Hill Note is May 2, 2021. The Jeff Hill Note will be modified so that the interest rate will be 6 percent per annum for the next 60 months. The current amortization schedule which provides for monthly payments based on a 259-month amortization schedule will continue. However, at the conclusion of 60 months, the Jeff Hill Note will be re-evaluated for potential renewal and re-evaluation of the appropriate interest rate if applicable. The first monthly payment shall be on or before March 15, 2020. Freedom Bank will retain its lien on the real estate and the modular home affixed thereon until its claim is paid in full. D. Additional Provisions Relating to Freedom Bank. Other than as expressly provided herein, nothing contained within the Order of Confirmation or the Plan of Reorganization will prevent creditor from pursuing or enforcing any rights, remedies or claims arising out of or relating to the above transaction which creditor may have against any other person or entity other than Debtor. About Hill & Hill Maintenance Hill & Hill Maintenance & Excavation, Inc., was formed to provide general maintenance, repair, and limited construction and excavation to park facilities in and around southwest Missouri and northern Arkansas through subcontracts awarded by U.S. government and state agencies with the majority being awarded by The Army Corps of Engineers. All stock ownership is held by Jeffrey S. Hill who also serves as president. Hill & Hill Maintenance filed a Chapter 11 petition (Bankr. W.D. Mo. Case No. 19-30255) on May 22, 2019, estimating less than $500,000 in both assets and liabilities. The Debtor is represented by: DAVID SCHROEDER LAW OFFICES, P.C. David E. Schroeder #32724 1524 East Primrose, Suite A Springfield, Missouri, 65804 Tel: (417) 890-1000 Fax: (417) 886-8563 E-mail bk1@dschroederlaw.com ILLINOIS STAR: April 28 Plan Confirmation Hearing Set ----------------------------------------------------- On January 30, 2020, debtor Illinois Star Centre LLC filed with the U.S. Bankruptcy Court for the Southern District of Illinois a Plan of Reorganization and a Disclosure Statement. On March 17, 2020, Judge Laura K. Grandy approved the Disclosure Statement and established the following dates and deadlines: * April 28, 2020, at 9:00 a.m., in U.S. Bankruptcy Court, Melvin Price US Courthouse, 750 Missouri Ave, East St Louis, IL 62201 is the hearing for the consideration of confirmation of the Plan of Reorganization. * Acceptances or rejections of their Plan will be submitted to the attorney for the debtor, Robert E Eggmann on or before seven days prior to the date of hearing on confirmation of said Plan. * Any objection to confirmation of the Plan shall be filed on or before seven days prior to the date of the hearing on confirmation of the Plan, with a copy to the attorney for the Debtor(s). A full-text copy of the order dated March 17, 2020, is available at https://tinyurl.com/spp9n5b from PacerMonitor at no charge. About Illinois Star Centre Illinois Star Centre LLC owns the Illinois Star Centre Mall located at 3000 W. Deyoung Street, Marion. The mall, which is valued at $5.5 million, offers more than 50 stores and restaurants and serves the Southern Illinois Community with events that showcase local talent. Illinois Star Centre sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Ill. Case No. 17-30691) on May 4, 2017. In the petition signed by Dennis D. Ballinger, Jr., its managing member, the Debtor disclosed $5.6 million in assets and zero liabilities. The case is assigned to Judge Laura K. Grandy. Carmody MacDonald, P.C., is the Debtor's bankruptcy counsel, and Hoffman Slocomb LLC, is its special counsel. The Debtor tapped Vista Properties and Investments to assist in the marketing and sale of its real estate located at 3000 DeYoung, Marion, Illinois. No official committee of unsecured creditors has been appointed in the case. INTERNAP TECHNOLOGY: Unsecureds Unimpaired in Prepackaged Plan -------------------------------------------------------------- Internap Corporation, Datagram LLC, Hosting Intellect LLC, Internap Connectivity LLC, SingleHop, LLC, Ubersmith, Inc., and Internap Technology Solutions Inc. filed a Joint Prepackaged Chapter 11 Plan and a Disclosure Statementon March 15, 2020, as it may be amended, supplemented, restated, or modified from time to time. The Plan provides for a restructuring of INAP that will eliminate approximately $293.2 million in debt from its balance sheet. As a result, INAP will emerge from the Chapter 11 Cases a stronger company, with a sustainable capital structure that is better aligned with INAP’s present and future operating prospects. INAP is commencing this solicitation on the Plan following extensive discussions with certain of its key stakeholders. The discussions have resulted in majorities of its stakeholders agreeing to (a) support the Restructuring and (b) to vote to accept the Plan pursuant to a Restructuring Support Agreement, dated as of March 13, 2020, among INAP and certain lenders under the Existing Credit Agreement. As a result of the Restructuring provided in the Plan: * Holders of Existing Loan Claims will receive : (i) commitments under the New Term Loan Facility; and (ii) 100% of New Common Equity, subject to dilution by the Management Incentive Plan and New Common Equity Warrants. Holders of these claims will recover 54.6% to 81.5% under the Plan. * Holders of General Unsecured Claims will each receive payment in cash in an amount equal to the allowed claim. The class is unimpaired and will recover 100%. * All existing Equity Interests will be cancelled, released, and extinguished as of the Effective Date, and holders of Existing Equity Interests shall not receive or retain any property under the Plan on account of such Existing Equity Interests, provided, however, that notwithstanding the foregoing, each holder of Existing Equity Interests that (i) is a beneficial holder of INAP's common stock as of the Effective Date and (ii) has executed an Existing Equity Release pursuant to the Existing Equity Notice Materials, will receive its Pro Rata share 100% of the New Common Equity Warrants. In order to fund the distributions, in connection with consummation of the Plan, INAP anticipates (1) using commercially reasonable efforts to enter into a new senior secured asset-based revolving credit facility, in the anticipated aggregate amount of $15 million, senior in priority to the New Term Loan Facility and pari passu with the Priority Exit Facility (or senior to the Priority Exit Facility with the consent of the Required DIP Lenders) (the "Working Capital Exit Facility"), (2) entering into a new senior secured credit facility, in the aggregate amount equal to the principal amount of loans under the DIP Facility, senior in priority to the New Term Loan Facility and equal in priority to the Working Capital Exit Facility or, upon the consent of the Required DIP Lenders or Required Priority Exit Facility Lenders, as applicable, junior in priority to the Working Capital Exit Facility (the "Priority Exit Facility"), (3) entering into a new senior secured term loan facility, in the anticipated aggregate amount of $225 million which commitments thereunder will be distributed Pro Rata to holders of Allowed Existing Loan Claims (the "New Term Loan Facility"). Class 4 Allowed General Unsecured Claims are unimpaired. Although all General Unsecured Claims have been placed in one Class for the purposes of nomenclature, the General Unsecured Claims against each applicable Debtor shall be treated as being in a separate sub- Class for the purpose of receiving distributions under the Plan. Except to the extent previously paid during the Chapter 11 Cases or such holder agrees to less favorable treatment, each holder of an Allowed Class 4 Claim will receive from each relevant Reorganized Debtor, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, each such Claim, (i) payment equal to the Allowed amount of such Claim, in Cash, as and when such Claim becomes due and payable in the ordinary course of the applicable Debtor's business or in accordance with applicable court order (plus any interest accrued after the Petition Date with respect to such Claim to the extent required by law to render such Claim Unimpaired, as determined by the Debtors or ordered by the Bankruptcy Court), or (ii) such other treatment that renders such holder Unimpaired. A full-text copy of the Disclosure Statement dated March 16, 2020, is available at https://tinyurl.com/wbg4fmq from PacerMonitor.com at no charge. Proposed counsel to the Debtors: Dennis F. Dunne Abhilash M. Raval Tyson Lomazow MILBANK LLP 55 Hudson Yards New York, NY 10001 Tel: (212) 530-5000 About Internap Corporation Internap Corporation (NASDAQ: INAP) -- http://www.INAP.com/-- is a leading-edge provider of high-performance data center and cloud solutions with 100 network Points of Presence worldwide. INAP's full-spectrum portfolio of high-density colocation, managed cloud hosting and network solutions supports evolving IT infrastructure requirements for customers ranging from the Fortune 500 to emerging startups. INAP operates in 21 metropolitan markets, primarily in North America, with 14 INAP Data Center Flagships connected by a low-latency, high-capacity fiber network. On March 16, 2020 Internap Technology Solutions Inc. and 6 affiliated debtors, including INAP Corporation, each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Debtors have requested that their cases be jointly administered under lead case In re Internap Technology Solutions Inc., et al. (Bankr. S.D.N.Y. Case No. 20-20-22393). INAP is advised in this matter by FTI Consulting as restructuring advisor, Milbank LLP as legal counsel and Moelis & Company as financial advisor. Prime Clerk LLC is the claims agent. INTERNATIONAL SEAWAYS: Moody's Puts B3 CFR on Review for Downgrade ------------------------------------------------------------------ Moody's Investors Service placed all of its ratings for International Seaways, Inc. on review for downgrade, including the B3 Corporate Family Rating and Caa1 rating on its senior unsecured notes due 2023. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The shipping sector is one of the sectors that will be significantly affected by the shock given its sensitivity to consumer demand, general economic and industrial activity. More specifically, INSW's credit profile, including its high annual amortization requirements and its exposure to highly cyclical markets and freight rate volatility, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and INSW remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the likely impact on INSW of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. In its review, Moody's will consider: (i) the company's liquidity profile, including prospects to cover its high mandatory amortization approximating $72 million in 2020 and $82 million in 2021; (ii) evolving market conditions, including the extent and impact of the coronavirus outbreak and oil price dislocations on demand and pricing conditions; (iii) the company's ability to adapt its costs and investments to potentially sharp or prolonged negative changes in freight rate conditions, including demand for the company's services; and (iv) prospects for INSW to restore credit metrics when economic activity recovers. Moody's took the following actions: Issuer: International Seaways, Inc. Corporate Family Rating, Placed on Review for Downgrade, currently at B3 Senior Unsecured Notes, Placed on Review for Downgrade, currently at Caa1 Senior Unsecured Shelf, Placed on Review for Downgrade, currently at (P)Caa1 Outlook actions: Issuer: International Seaways, Inc. Outlook, Changed to Ratings Under Review, from Stable The principal methodology used in these ratings was Shipping Industry published in December 2017. International Seaways, Inc., a Marshall Islands corporation, is a leading provider of ocean-based transportation of crude oil and refined petroleum in the international market. It operates its business under two segments: international crude tankers and international product carriers. The company has a fleet of 40 vessels of varying classes, including ownership interests in 2 FSO vessels through joint venture partnerships. Total revenues were approximately $366 million as of the last twelve months ended December 31, 2019. ISTAR INC: S&P Alters Outlook to Negative, Affirms 'BB' ICR ----------------------------------------------------------- S&P Global Ratings said it revised its outlook on iStar Inc. to negative from stable. At the same time, S&P affirmed all its ratings on iStar, including its 'BB' issuer credit and senior unsecured debt ratings. "The negative outlook reflects our expectation for economic pressure related to COVID-19 to erode the credit performance of iStar's loan portfolio and, to a lesser extent, its net leasing portfolio. We believe that this, coupled with the firm's already weaker-than-peer profitability, could cause its debt to adjusted total equity leverage to increase above our expectation of 2.75x for the rating, given that it was 2.56x at year-end 2019," S&P said. "The negative outlook reflects the potential for weaker economic conditions to cause debt to total adjusted equity leverage to rise above our 2.75x expectation for the ratings. We also expect the company to maintain its long-term, largely unsecured funding and adequate liquidity," the rating agency said. Over the next 12 months, S&P could lower its ratings on iStar if it expects: -- Leverage to increase above 2.75x on a sustained basis, or -- Asset quality, profitability, or liquidity to deteriorate materially. Over the same time horizon, S&P could revise the outlook to stable if the macro environment improves, iStar's asset quality is relatively stable, and the company maintains leverage below 2.75x. J.T. SHANNON: Unsecureds to be Paid from Asset Net Sale Proceeds ---------------------------------------------------------------- Debtor J.T. Shannon Lumber Company, Inc. (JTSLC) filed with the U.S. Bankruptcy Court for the Northern District of Mississippi, Oxford Division, a Disclosure Statement and a Plan of Reorganization dated March 19, 2020. The Debtor’s principal secured bank is Triumph Bank (Triumph). The Debtor is liable to Triumph for pre-petition loans made to the Debtor and Shamrock. As a result of its inability to satisfy customer orders, JTSLC’s customer base began to shrink. In order to sustain its ongoing operation, JTSLC entered into a Processing Agreement dated November 1, 2018, with Anderson-Tully Lumber Company (ATCO), a customer of the Debtor. Class 5: Pre-petition General Unsecured Non-Priority Insider Claims. Class 5 consists of the allowed General Unsecured Non-Priority Claims of (a) Amelia Exempt Trust; (b) Amelia Non-Exempt Trust, (c) Forest to Floors, LLC, (d) Harmor, LLC, (e) Jack T. Shannon, (f) Kathryn C. Shannon and (f) Origin Floor LLC for loans made to the Debtor. The aggregate amount of Class 5 claims is approximately $2, 953, 533.76. Allowed Class 5 claims shall be paid pro-rata out of any net sale proceeds remaining from the sale of the Debtor’s assets following termination of the Processing Agreement after allowed Class 4 claims have received a distribution of 50% as provided in the Plan. Any net sale proceeds remaining after allowed Class 5 claims will be distributed pro-rata between allowed Class 4 and Class 5 claims. Class 6. Interests of Equity Holders. Class 6 consists of the interests of the shareholders of the Debtor. Jack T. Shannon Jr. shall retain his shareholder interest but shall not receive any distribution on account of such interest unless and until Class 4 and Class 5 creditors are paid in full. Class 6 is impaired. On the Effective Date, the Processing Agreement between the Debtor and ATCO shall be assumed. The Debtor shall continue to operate its business and perform the Processing Agreement. Jack T. Shannon, Jr. shall remain as President and Chief Executive Officer of the Reorganized Debtor. The Debtor shall make payments to each class of creditors to the extent required under the Plan out of its existing cash, future Cash Flow, and capital infusions, if any, made to Debtor by a third party as necessary to satisfy Plan payments. The Debtor shall retain the right to market and sell the assets of the Reorganized Debtor during the term of the Processing Agreement. If, upon the expiration of the Processing Agreement, the Debtor has not been successful in entering into an asset purchase agreement with ATCO with respect to the Debtor’s business and assets, or, ATCO fails to exercise its right to make a first offer on the Facility pursuant to the terms of the Processing Agreement, the Reorganized Debtor will retain the services of third party professionals to assist in the sale of the Debtor’s business and assets. The Debtor shall liquidate the remaining assets of the business and distribute the sale proceeds in accordance with this Plan. On the Effective Date, all property of the Estate shall revest in the Debtor free and clear of all claims, liens, encumbrances, and interests of creditors or Interest holders, except as provided in the Plan, the Confirmation Order or other applicable order of the Court. A full-text copy of the Disclosure Statement dated March 19, 2020, is available at https://tinyurl.com/yx7yjbrs from PacerMonitor at no charge. The Debtor is represented by: GLANKLER BROWN, PLLC Michael P. Coury 6000 Poplar Avenue, Suite 400 Memphis, TN 38119 Tel: (901) 576-1886 Fax: (901) 525-2389 E-mail: mcoury@glankler.com About J.T. Shannon Lumber Memphis, Tenn.-headquartered J.T. Shannon Lumber Company, Inc. -- http://www.jtshannon.com/shannonlumber-- is a family-owned company in the hardwood lumber business. It specializes in rough and surfaced lumber, straight-line ripping, double-end trimming, width sorts, and special length pulls. J.T. Shannon Lumber Company sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Miss. Case No. 19-11428) on April 1, 2019. At the time of the filing, the Debtor disclosed $11,026,770 in assets and $14,721,825 in liabilities. The case is assigned to Judge Jason D. Woodard. Michael P. Coury, Esq., at Glankler Brown PLLC, is the Debtor's legal counsel. JAZZ ACQUISITION: S&P Alters Outlook to Negative, Affirms 'B-' ICR ------------------------------------------------------------------ S&P Global Ratings revised its outlook on Jazz Acquisition Inc. to negative from positive and affirmed all of its ratings on the company, including the 'B-' issuer credit rating. "We expect Jazz's credit metrics to be weaker in 2020 than we'd previously expected as a result of the coronavirus. The company operates mainly as a maintenance, repair, and overhaul provider; aftermarket parts manufacturer; and distributor. Jazz will likely face much lower demand as the coronavirus pandemic leads many airlines to ground planes. The company has started taking actions to reduce costs and preserve liquidity. While we are unsure of the overall impact the coronavirus will have on Jazz, we now expect debt to EBITDA to be above 7.5x in 2020 compared to our previous forecast of about 6x," S&P said. The negative outlook reflects S&P's expectation that Jazz's credit metrics will weaken as a result of lower air traffic because of the coronavirus. The rating agency now expects debt to EBITDA to be above 7.5x in 2020. "We could lower the ratings if the impact on Jazz's earnings and free cash flow from the coronavirus is greater than we expect, resulting in weaker liquidity. We could also consider a downgrade if sustained high leverage led us to believe that the company's capital structure is no longer sustainable over the long term," S&P said. "We could revise the outlook to stable over the next 12 months if we expect debt to EBITDA to remain below 7.5x and free operating cash flow to debt to remain positive. This would likely be the result of a quicker-than-expected recovery in air traffic driving higher aftermarket demand," the rating agency said. JC PENNEY: Fitch Lowers LongTerm Issuer Default Rating to CCC- -------------------------------------------------------------- Fitch Ratings has downgraded J.C. Penney Company, Inc.'s (JCP) and J.C. Penney Corporation, Inc.'s Long-Term Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC+'. The downgrade reflects the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021, leading to heightened liquidity concerns. Fitch projects that J.C. Penney's 2020 EBITDA could turn materially negative, projected at approximately negative $400 million from a positive $580 million in 2019, on a sharp revenue decline of over 25% to around $8 billion. EBITDA is expected to be near breakeven in 2021, assuming revenue declines of around 20% in 2021 compared with 2019, worse than the low to mid-teens decline projected for other major department store peers. J.C. Penney ended 2019 with liquidity (cash on hand and availability on $2.35 billion ABL facility maturing June 2022) of $1.8 billion. J.C. Penney has about $145 million in debt maturities in 2020, including $42 million in annual term loan amortization and $105 million of unsecured notes due June 2020. Given a projected cash burn of $800 million, Fitch anticipates J.C. Penney would be able to fund the 2020 holiday season, ending the year with total liquidity of approximately $400 million. Given minimal EBITDA projected for 2021 and cash burn of $400 million before taking into consideration the funding of seasonal working capital, J.C. Penney could require additional sources of financing to fund 2021 holiday. As such, Fitch expects that a restructuring or default, including a distressed debt exchange, could be possible over the next 12 months if EBITDA comes in line or worse than Fitch's projections. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retail stores in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved. They also include the economic conditions exiting the pandemic including unemployment and household income trends, particularly for J.C. Penney's target demographic; the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch has assumed a scenario where discretionary retailers in the U.S. are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid-to-high single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expect total 2021 sales could remain 8%-10% below 2019 levels. Fitch has forecasted that department store sales, which have been on a secular decline, will fare worse with 2021 sales projected to decline in the low to mid-teens. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, with 2022 projected as a modest growth year. Assuming this scenario, Fitch expects J.C. Penney's performance to be worse than the average given recent trends, with revenue declining over 25% in 2020 and EBITDA turning materially negative at approximately negative $400 million versus a positive $580 million in 2019. EBITDA is expected to be near breakeven in 2021, assuming revenue declines of around 20% in 2021 compared with 2019. Material Decline in Comps: 2019 comps declined 7.7% in 2019, with quarterly comps declining negative mid-to-high single digits since the second half of 2018. Part of the decline in 2019 comps is due to the exit of appliances and in-store furniture categories. EBITDA (excluding asset sales gains and adding back non-cash based compensation) increased to $580 million in 2019 up from $563 million in 2018, and was $886 million in 2017 and over $1 billion in 2016. Prior to the recent dislocation in discretionary retail sales, Fitch had expected J.C. Penney's comps to be in the negative low-to-mid single digit range in 2020, given continued weakness in key categories and the ongoing traffic challenges at mid-tier mall-based apparel retailers, as volume continues to shift online and to discount channels such as fast fashion and off-price. Women's apparel, which accounted for $2.2 billion or 21% of revenue declined 3.5% in 2019. Men's apparel and accessories (22% of revenue) and children's apparel (9% of revenue) have also declined in the 3%-6% range. Historically, the women's business has been over-assorted in traditional women's clothing and under-assorted in casual, contemporary and active wear. Fitch views the turnaround in this business as challenging, as it plays catch-up to both existing and new entrants in a crowded space. Areas such as home and appliances (11% of sales), which were trending positive between 2013-2017, declined 15% in 2018. Increased investment in home and appliances were initiatives begun by prior management to opportunistically take share away from struggling retailers such as Sears; however, new management eliminated appliances and in-store furniture sales in 2019, and had a 210 bps negative impact on total comps, but a positive impact on gross margin. Jill Saltou, who was appointed CEO in October 2018 and previously served as President and CEO of JOANN Stores, has been putting together her senior management team and doing a comprehensive review of the J.C. Penney business. In recent months, the company has replaced or added key management positions including its CFO, Chief Customer Officer, Chief Merchant, EVP of Stores, SVP, Home Product Design and Development, Chief Transformation Officer, SVP, Asset Protection and SVP, Planning & Allocation. The company has focused on inventory management to improve inventory productivity, gross margin levels and cash flow. The company reduced its inventory by 16%, 13%, 9% and 11%, respectively in quarters 1Q19 to 4Q19. It has eliminated non-core and low-margin categories to focus on high-margin areas such as apparel and soft home. Recent category exits include major appliances, furniture (in-store) and certain online drop-ship SKUs. The major appliances and furniture businesses represented 2.7% of sales in 2018, but were negative in operating profit. The company is also focused on improving its shrink results and restoring clearance selling margins to historical levels, which benefit gross margin in 2019. DERIVATION SUMMARY The rating downgrades and outlook revisions for the department stores reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Kohl's, Nordstrom, Macy's and Dillard's are expected to have sufficient liquidity to manage operations through this downturn, should Fitch's projections come to fruition. J.C. Penney's U.S. department store peers include Nordstrom, Inc., Kohl's Corporation, Macy's, Inc. and Dillard's, Inc. J.C. Penney (CCC-): Fitch expects J.C. Penney's EBITDA could turn materially negative in 2020 in the range of negative $400 million. While the company ended 2019 with $1.8 billion in liquidity (cash and revolver), the significant disruption from coronavirus have led to heightened liquidity concerns given the projected cash burn. Nordstrom (BBB/Negative): Fitch projects adjusted leverage increasing to 7x in 2020 from 3x in 2019, based on EBITDA declining to approximately $550 million from $1.6 billion on a sales revenue decline of over 20% to $12 billion. Adjusted leverage is expected to decline to the low 3x in 2021, assuming sales declines of around 10% and EBITDA declines of around 20% in 2021 from 2019 levels. Nordstrom's ratings reflect its position as a market share consolidator in the apparel, footwear and accessories space, with its differentiated merchandise and high level of customer service enabling the company to enjoy strong customer loyalty. The company has a well-developed product offering across a diverse portfolio of full line department stores, off-price Nordstrom Rack locations and multiple online channels. Kohl's (BBB-/Negative): Fitch anticipates Kohl's leverage to increase to over 6x in 2020 from 2.3x in 2019, based on EBITDA declining to approximately $550 million from $2 billion on a sales decline of 20% to under $16 billion. Adjusted leverage is expected to be in the mid 3x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Kohl's ratings reflect its position as the second largest department store in the U.S. and Fitch's expectation that the company should be able to able to accelerate market share gains post the discretionary downturn. Kohl's has a well-developed omnichannel strategy, with online sales contributing close to 25% of total revenue which should benefit its top-line as retail sales continue to move online. Kohl's off-mall real estate footprint provides some insulation from mall traffic challenges. Macy's (BB+/Negative): Fitch anticipates leverage increasing to over 11x in 2020 from 2.9x in 2019, based on EBITDA declining to approximately $325 million from $2 billion on a revenue decline of nearly 25% to $19.2 billion. Adjusted leverage is expected to be around 4x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Macy's ratings continue to reflect its position as the largest department store chain in the U.S. and Fitch's view of a prolonged timeframe for the company's operating trajectory to stabilize on a lower EBITDA base, given weak mall traffic and heightened competition from alternate channels that include online and off-price. Dillard's (BB/Negative): Fitch anticipates EBITDA dropping to under $50 million in 2020 from $392 million in 2019 on a revenue decline of over 20% to $5 billion. Adjusted leverage is expected to be over 2x in 2021, assuming sales declines in the low-teens and EBITDA of approximately $300 million or around 30% lower compared to 2019 levels. Dillard's ratings reflect the company's below-industry-average sales productivity (as measured by sales psf), operating profitability and geographical concentration relative to its larger department store peers, Kohl's, Nordstrom and Macy's. The ratings consider Dillard's strong liquidity and minimal debt maturities, with adjusted debt/EBITDAR expected to return to the 2x range in 2021. KEY ASSUMPTIONS Here are Fitch's projections prior to disruption related to coronavirus: -- Comps to be down 5% in 2020 and decline in the low-single digits thereafter -- EBITDA trends towards $500 million in 2020 from $580 million in 2019, with continued contractions thereafter toward the low-to-mid-$400 million range. -- FCF to be negative $100 million to $200 million. -- Adjusted debt/EBITDAR to remain above 7x with liquidity adequate at over $1 billion at the end of 2020. Here are Fitch's revised projections reflecting the significant business interruption from coronavirus and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch projects that J.C. Penney's 2020 EBITDA could turn materially negative, projected at approximately negative $400 million from a positive $580 million in 2019, on a sharp revenue decline of over 25% to around $8 billion. EBITDA is expected to be near breakeven in 2021, assuming revenue declines of around 20% in 2021 compared with 2019, worse than the low to mid-teens decline projected for other major department store peers. -- Fitch expects cash burn (or negative FCF) of approximately $800 million in 2020. Fitch projects J.C. Penney would be able to fund the 2020 holiday season, ending the year with total liquidity of approximately $400 million. Given minimal EBITDA projected for 2021 and cash burn of $400 million before taking into consideration the funding of seasonal working capital, J.C. Penney could require additional sources of financing to fund the 2021 holiday. -- As such, Fitch expects that a restructuring or default, including a distressed debt exchange, could be possible over the next 12 months if EBITDA comes in line or worse than Fitch's projections. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action -- A positive rating action could occur if J.C. Penney's comps stabilize and if EBITDA returns to and sustained over $600 million, such that FCF is positive and adjusted debt/EBITDAR (capitalizing leases at 8x) moves below 7.0x and increased confidence in their ability to address 2023 maturities. Developments that May, Individually or Collectively, Lead to Negative Rating Action -- Given minimal EBITDA projected for 2021 and cash burn of $400 million before taking into consideration the funding of seasonal working capital, J.C. Penney could require additional sources of financing to fund 2021 holiday. As such, Fitch expects that a restructuring or default, including a distressed debt exchange, could be possible in 2021 if EBITDA comes in line or worse than Fitch's breakeven projections. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Heightened Liquidity Risk: J.C. Penney had cash and cash equivalents of $386 million as of Feb. 1, 2020 and approximately $1.4 billion available under its $2.35 billion credit facility due to mature on June 2022, after accounting for $203 million of letters of credit (LOC) based on a borrowing base calculation. J.C. Penney has about $145 million in debt maturities in 2020, including $42 million in annual term loan amortization and $105 million of unsecured notes due June 2020. The next long term debt maturities are in June 2023, when $1.54 billion of term loan A and $500 million of first lien secured notes come due. Given a projected cash burn of $800 million in 2020, Fitch anticipates J.C. Penney would be able to fund this holiday season this year, ending the year with total liquidity of approximately $400 million. Given minimal EBITDA projected for 2021 and cash burn of $400 million before taking into consideration the funding of seasonal working capital, J.C. Penney could require additional sources of financing to fund 2021 holiday. On July 19, 2019, the company stated that it routinely hires external advisors to evaluate opportunities for the company, but confirmed that it had "not hired any advisors to prepare for an in-court restructuring or bankruptcy." Unlike many retailers, J.C. Penney has a rich asset base inclusive of owned real estate, which is factored into Fitch's recovery analysis. The company may also be able to monetize below market rate leases and unlock value from private brands, which represent 46% of revenue. These assets could be utilized by J.C. Penney to refinance or make changes to its capital structure. RECOVERY CONSIDERATIONS For issuers with IDRs of 'B+' and below, Fitch performs a recovery analysis for each class of obligations of the issuer. The issue ratings are derived from the IDR and the relevant Recovery Rating (RR) and notching, based on Fitch's recovery analysis that places a liquidation value under a distressed scenario of $3 billion to $4 billion (taking into seasonal working capital swings). Fitch has applied a 70% to 80% advance rate against inventory level as a proxy for a net orderly liquidation value of the assets. In coming up with a real estate value of approximately $1.7 billion, Fitch took a 10% haircut to the dark store valuation of owned stores shared by J.C. Penney in an 8K filing dated March 9, 2020 in connection to a recent discussion with a creditor to explore capital structure opportunities that has since been discontinued. J.C. Penney appraised its 272 (including six distribution centers) encumbered properties at $1.34 billion and unencumbered 110 owned and ground leased stores at $545 million on a dark valuation basis. The company also appraised 240 leased locations at $151 million which Fitch does not factor in its analysis. Total real estate valuation is materially lower than Fitch's prior expectations of $3 billion which valued owned stores at $7 million per store based on realized average transaction multiples (with significant asset sales at Sears and Macy's since 2015) and six distribution centers at $300 million, adversely impacting the recovery on the secured term loan, first lien and second-lien secured notes. The liquidation value is higher than the going-concern value, which Fitch estimates at about $2.8 billion, based on a going-concern EBITDA of $700 million and a 4x multiple. The $700 million EBITDA assumes a rightsizing of the business in which the revenue base is around 35% lower than 2019 levels but at an improved EBITDA margin of around 8% to 10%, which is comparable to J. C. Penney's department store peers. The 4.0x multiple is lower than the 5.4x median multiple for retail going-concern reorganizations, the 12-year retail market multiples of 5.0x to 11.0x, and 7.0x to 12.0x for retail transaction multiples. The 4.0x multiple reflects the significant share losses by department stores to other formats. J. C. Penney's $2.35 billion senior secured asset-backed loan (ABL) facility that matures in June 2022 is rated 'B-'/'RR1', which indicates outstanding recovery prospects (91%-100%) in a distressed scenario. The facility is secured by a first-lien priority on inventory and receivables, with borrowings subject to a borrowing base. Any proceeds of the collateral will be applied first to the satisfaction of all obligations under the revolving facility. Given the significant reduction in inventory and further reductions anticipated this year based on material sales declines, Fitch does not expect material excess collateral to be available to service other debt. In the event that its fixed charge coverage ratio is less than 1x, J.C. Penney is required to maintain a minimum excess availability at all times of not less than (a) $200 million in the event that 10% of the line cap (the lesser of total commitments under the credit facility or the borrowing base) is equal to or greater than $200 million or (b) the greater of (i) 10% of line cap and (ii) $150 million in the event that 10% of the line cap is less than $200 million. The calculation for the fixed charge coverage ratio allows J.C. Penney to deduct up to $250 million in debt repayments made over the prior 12 months. The $1.54 billion term loan and $500 million senior secured notes due June 2023 are expected to have good recovery prospects (51% to 70%), leading to a 'CCC'/'RR3' rating. Both the term loan facility and senior secured notes are secured by (a) first-lien mortgages on 266 owned and ground-leased stores (subject to certain restrictions primarily related to Principal Property owned by J. C. Penney Corporation, Inc.) and six owned distribution centers; (b) a first lien on intellectual property (trademarks including J.C. Penney, Liz Claiborne, St. John's Bay and Arizona), machinery and equipment; (c) a stock pledge of J.C. Penney Corporation and all of its material subsidiaries and all intercompany debt; and (d) second lien on inventory and accounts receivable that back the ABL facility. The term loan and senior secured notes rank pari passu in terms of priority of payment. The $400 million senior second lien secured notes due 2025 are expected to have poor recovery prospects (0% to 10%), leading to a 'C'/'RR6' rating. The notes are secured by a second lien on the assets (real estate and IP assets) securing the term loan and senior first lien secured notes and a third lien on the ABL collateral. The senior unsecured notes are rated 'C'/'RR6', indicating poor recovery based on recovery from excess ABL collateral and unencumbered real estate. SUMMARY OF FINANCIAL ADJUSTMENTS - EBITDA adjusted to exclude stock-based compensation - Operating lease expense capitalized by 8x for historical and projected adjusted debt JO-ANN STORES: Moody's Cuts CFR to B3 & Alters Outlook to Negative ------------------------------------------------------------------ Moody's Investors Service downgraded Jo-Ann Stores LLC.'s corporate family rating to B3 from B2, its probability of default rating to B3-PD from B2-PD, its first lien term loan to B3 from B1 and its second lien term loan was affirmed at Caa1. The outlook was changed to negative from stable. "The downgrade reflects store closures and negative effect on consumer demand caused by the wide spread outbreak of COVID-19 that will significantly impact leverage and coverage", said Moody's analyst Peggy Holloway. Jo-Ann's leverage was already elevated as the implementation of tariffs took a toll on earnings in the year ended February 2, 2020. Jo-Ann has been able to qualify as an essential business in some areas and so has been able to keep many stores open thereby helping to partially offset negative operating leverage. Given the severe shock to the US economy, consumer demand is expected to be experience a slow rebound. Jo-Ann's cash balances, including its revolver draw, will enable the company to meet its obligations even if the closures last for several months. The company's revolver matures in October 2021, 1st lien Term Loan matures in October 2023, and 2nd lienTerm Loan matures in May 2024. The negative outlook reflects uncertainty around the duration of unit closures, liquidity, and pace of rebound in consumer demand once the pandemic begins to subside. Downgrades: Issuer: Jo-Ann Stores LLC. Probability of Default Rating, Downgraded to B3-PD from B2-PD Corporate Family Rating, Downgraded to B3 from B2 Senior Secured 1st Lien Bank Credit Facility, Downgraded to B3 (LGD3) from B1 (LGD3) Affirmations: Issuer: Jo-Ann Stores LLC. Senior Secured 2nd Lien Bank Credit Facility, Affirmed Caa1 Outlook Actions: Issuer: Jo-Ann Stores LLC. Outlook, Changed To Negative From Stable RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The Non-food retail sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Jo-Ann's credit profile, including its exposure to widespread stock closures have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Jo-Ann remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Jo-Ann of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Jo-Ann is constrained by the company's small size and leverage profile relative to its larger, well-capitalized competitors, declines in same store sales in FY20 due to stagnant demand, and margin pressure caused principally by tariffs and promotional activity. Governance risk is also a key rating constraint given the company's financial sponsor ownership which typically results in more aggressive financial strategies. Jo-Ann is supported by a relatively stable, albeit low growth, demand outlook in the highly fragmented craft and hobby category, higher margins relative to other retail segments and adequate liquidity. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if the duration of the closures lingers, thereby squeezing liquidity or if the probability of default increases for any reason. Quantitatively, ratings could be downgraded if debt/EBITDA is sustained above 6.5x or EBIT/interest is sustained below 1.0x. Given the negative outlook an upgrade over the near term in unlikely. However, ratings could be upgraded once the impact of coronavirus has abated and operating performance has improved such that debt/EBITDA drops below 5.5x and EBITA/interest expense approaches 1.4x. JOSEPH A. BRENNICK: Durkits Buying Conway Property for $410K ------------------------------------------------------------ Joseph A. Brennick asks the U.S. Bankruptcy Court for the Middle District of Florida to authorize the sale of the real property located 94 Whitaker Lane, Conway, New Hampshire to Steve and Merlene Durkit for $410,000. The Debtor owns the Real Property. He has received an offer from the Purchasers to purchase the Real Property for the agreed purchase price. The terms of the offer are set forth in their Purchase and Sales Agreement. Consummation of the proposed sale may involve the incurrence of and the payment of certain expenses, including certain appraisal fees, title insurance, and other normal costs of closing, payment of which should be made from the sales proceeds. The Debtor believes that the Internal Revenue Service asserts a blanket lien on all of the Debtors' real estate assets. The IRS has filed an amended secured claim in the amount of $1,749.802, which has been designated as Claim No. 12-6 on the claims register. The IRS' liens were recorded between Nov. 29, 2016 through March 29, 2017. The Debtor reserves all rights with respect to the validity and amount of the claim of the IRS. Additionally, the Town of Conway may claim a lien on the Real Property by virtue of real estate taxes. On Jan. 30, 2020, the Debtor filed an application to employ Badger Realty, LLC as broker in connection with the sale of the Real Property. On Jan. 30, 2020, the Court entered an order authorizing the employment of Badger and further authorizing the Debtor to pay a 5% brokerage commission at the closing of the sale of the Real Property. The Debtor asks authority to sell the Real Property under the Contract free and clear of all liens, claims, encumbrances, and interests. He also asks authority to pay the brokerage commission, Town of Conway, and the Closing Costs at the closing without further order of the Court. The Debtor has determined that the $410,000 offer is the highest and best available. A copy of the Agreement is available at https://tinyurl.com/s7btw9a from PacerMonitor.com free of charge. Joseph A. Brennick sought Chapter 11 protection (Bankr. M.D. Fla. Case No. 18-07874) on Sept. 18, 2018. The Debtor tapped Edward J. Peterson, III, Esq., at Stichter, Riedel, Blain & Postler, P.A., as counsel. KAUMANA DRIVE: PCO Files Final Report ------------------------------------- Jacqueline Gardner, the Patient Care Ombudsman of Kaumana Drive Partners LLC, commonly referred to as the Legacy Hilo Rehabilitation and Nursing Center, submits her final report with the U.S. Bankruptcy Court for the District of Hawaii. The PCO conducted a visit to the Debtor's facility between December 3, 2019, the date of the last visit reported in her initial report, and December 31, 2019, when the facility was sold. The PCO reports the following: (A) Facility: -- The facility remained in good to excellent condition during the relatively short period prior to and after the Court's approval of the sale of substantially all of the Debtor's assets on December 12, 2019. -- The sale closed on December 31, 2019, resulting in the transfer to the buyer, Hilo SNF,LLC, of the facility and obligation to care for the patients or residents. (B) Staff: -- During the period of December 3 through December 31, 2020, there were sufficient staff to provide the specialized services to its patients through licensed professionals, including room and board, nursing care provided by registered professional nurses, physical therapy, occupational therapy, speech therapy,social services, medications, supplies, equipment, and other services necessary to the health of the patient. (B) Patients: -- The facility had 73 patients; however, the exact number of patients/residents on the date the sale closed is unknown. The new owner became obligated to operate the facility and care for the residents. -- The families expressed no concerns over the care of their family's patient. -- No complaints from patients, family, or other interested persons about any patient care concerns. -- The facility was adequate for the needs of the patients with adequate staff and programs to meet patient needs. Following the report, the Ombudsman seeks to be discharged from her duties as PCO now that the facility has been sold and patient care obligations has been transferred to the new owner. Counsel for PCO: Barbara L. Franklin, Esq. 45-3438 Mamane Street, Bldg. #2 Honoka'a, Hawai'i 96727 Tel: (808) 775-0530 Fax: (808) 775-1040 Email: Barbara@Island-law.com About Kaumana Drive Partners Kaumana Drive Partners, LLC, owner of a skilled nursing care facility in Hilo, Hawaii, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Hawaii Case No. 19-01266) on Oct. 6, 2019. At the time of the filing, the Debtor was estimated to have assets between $10 million and $50 million and liabilities of the same range. The case is assigned to Judge Robert J. Faris. The Debtor tapped Choi & Ito, Attorneys at Law as its legal counsel. KLX ENERGY: S&P Lowers ICR to 'CCC+' as Sector Demand Deteriorates ------------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on KLX Energy Services Holdings Inc., a U.S.-based provider of onshore oilfield services and equipment, to 'CCC+' from 'B-'. The outlook is stable. At the same time, S&P is lowering its issue-level rating on KLX Energy's $250 million senior secured notes due November 2025 to 'CCC+' from 'B-'. The recovery rating is '3', which indicates S&P's expectation of meaningful (50%-70%; rounded estimate: 65%) recovery of principal in the event of a payment default. "Demand for onshore U.S. oilfield services collapsed along with oil prices. The recent fall in oil prices has led many E&P companies to announce material cuts to capital spending plans, leading us to reduce our demand expectations for the oilfield services sector. We now expect oilfield services demand could decline by about 30% in the U.S. in 2020, with further downside risk if the current weak price environment remains for a prolonged period. As a result, we are projecting revenues for KLX Energy to decline by at least 20% in 2020, compared with 2019, and expect that a vast oversupply of equipment and pricing pressure from customers will drive a deterioration in margins and profitability. Although KLX Energy provides a wide range of completion, intervention, and production services, most are highly commoditized, which leaves it susceptible to pricing competition from other oilfield service firms. The lower barriers to entry for services like wireline have resulted in a very saturated market," S&P said. The stable outlook reflects S&P's view that KLX Energy will maintain adequate liquidity for at least the next 12 months, given its cash, reduced capital spending level, and lack of debt maturities. The rating agency expects cash flow leverage metrics to remain very weak, with average FFO to debt of below 10% in 2020. "We could lower the rating if liquidity weakened or if we expected the company to engage in a distressed debt transaction," S&P said. "We could consider an upgrade if the company's credit metrics improved to a level we no longer considered to be unsustainable. This would most likely be driven by higher oil prices fueling increased E&P spending, which would increase the demand for oilfield services provided by companies like KLX Energy," S&P said. LADDER CAPITAL: S&P Cuts ICR to 'BB-' as Risks From COVID-19 Mount ------------------------------------------------------------------ S&P Global Ratings said it lowered its issuer credit rating on Ladder Capital Finance Holdings LLLP to 'BB-' from 'BB'. The outlook is negative. S&P also lowered its unsecured debt ratings to 'B+' from 'BB-'. "Our rating action is based on the possibility of margin calls and an erosion of earnings from significant credit deterioration in Ladder's loan portfolio and widening credit spreads on its commercial mortgage backed securities (CMBS) portfolio in the wake of COVID-19. The company's asset portfolio is more diverse than peers, but 50% of its $6.7 billion in assets are transitional commercial real estate (CRE) loans. Approximately 11% of the loan portfolio is secured by hotel collateral and 29% of the loan portfolio is in the northeast, mainly in New York. We expect these areas will be especially exposed to credit deterioration from current negative macroeconomic trends caused by the new coronavirus. Lastly, Ladder's loan portfolio is mainly bridge loans, where there could be substantial refinancing risk given current conditions," S&P said. The negative outlook on Ladder reflects the company's exposure to margin calls from its repurchase facilities over the next 12 months in an environment where S&P expects there to be significant deterioration in the credit quality of Ladder's asset portfolio. The rating agency expects Ladder will operate with debt to adjusted total equity of 2.75x to 3.25x. "We could lower the rating on Ladder over the next 12 months if the company's liquidity is depleted through margin calls or if the company's profitability is significantly eroded through increased provisions for loan losses. We could also lower the rating if leverage materially increases," S&P said. "We could revise our outlook on Ladder to stable over the next 12 months if the macroenvironment improves, the company's liquidity remains adequate in our view, asset quality is relatively stable, and leverage is within our expectations," the rating agency said. LAKE COUNTY SD 187: Moody's Affirms Rating on $3.5MM GOLT Bonds --------------------------------------------------------------- Moody's Investors Service has affirmed the Ba1 rating on Lake County Community Unit School District 187 (North Chicago), IL's outstanding general obligation limited tax (GOLT) bonds. Moody's has also assigned an initial Ba1 issuer rating. The action affects $3.5 million in rated GOLT bonds. The outlook is positive. The district's Ba1 issuer rating represents Moody's hypothetical assessment of debt supported by a general obligation unlimited tax (GOULT) pledge. The district does not currently have any outstanding debt supported by a GOULT pledge rated by Moody's. The pledge supporting the GOLT bonds is limited by the amount of the district's debt service extension base (DSEB). RATINGS RATIONALE The Ba1 issuer rating reflects the district's weak socioeconomic profile and tax base and high taxpayer concentration. Additionally, the district will be challenged in coming years with the potential of declining federal heavy impact aid as a result of its falling military dependent student population derived from the Naval Station Great Lakes. However, the district's sustained improvement to its financial position following two consecutive years of operating surpluses points to the probability of credit strengthening over the near term. Its rating also factors debt and pension burdens that are above average as a percentage of full value, but modest as compared to annual operating revenue. Social considerations are material to the rating. The district's weak regional incomes and wealth levels negatively affect its ability to raise local operating revenue. Negative population trends and high poverty rates will likely restrict future economic growth. The absence of distinction between the Ba1 issuer rating and the Ba1 GOLT rating is based on the district's pledge of all available funds. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. Moody's does not see any material immediate credit risks for North Chicago C.U.S.D. 187. However, the situation surrounding Coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If its view of the credit quality of North Chicago C.U.S.D. 187 changes, Moody's will update the rating and/or outlook at that time. RATING OUTLOOK The positive outlook reflects its expectation that the district's financial condition will remain healthy given recent improvements in operating performance and additional revenue provided by the state's evidenced based funding model. Additionally, the district will benefit from direct financial oversight through the Illinois (Baa3 stable) State Board of Education (ISBE). FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS - Sustained improvement to the district's financial operations, fund balance, and liquidity - Significant tax base expansion and strengthening of resident wealth and income levels FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS - Return of deficit operations that significantly narrow operating fund balance and liquidity - Material tax base contraction or weakening of resident wealth and income levels - Significant increase in the district's debt or pension burdens LEGAL SECURITY Outstanding GOLT debt is payable from all available funds and additionally secured by the district's pledge and authorization to levy a tax that is unlimited by rate but limited by the amount of the district's debt service extension base (DSEB). The district's DSEB as of fiscal 2020 totaled $1.5 million and grows each year by the lesser of 5% or the consumer price index. Assuming no annual growth in the DSEB, the tax will provide sufficient coverage on GOLT debt. PROFILE North Chicago Community Unit School District 187 is in Lake County (Aaa), approximately 40 miles north of the City of Chicago (Ba1 stable). North Chicago is home to the Naval Station Great Lakes, which is the only recruit training command for the United States Navy. The district operates eight school facilities providing Pre-K through 12th grade education to approximately 3,300 students. METHODOLOGY The principal methodology used in these ratings was US Local Government General Obligation Debt published in September 2019. LEGACY JH762: JPMorgan Objects to Disclosure Statement ------------------------------------------------------ JPMorgan Chase Bank, National Association, filed its objection to approval of Legacy JH762, LLC. JPMorgan Chase Bank objects to approval of Debtor's Disclosure Statement due to the fact that the disclosure statement fails to provide adequate Information. JPMorgan Chase Bank points out that the Debtor failed to provide proof that the subject property has sufficient hazard insurance and a copy of the current insurance policy is request. JPMorgan Chase Bank further points out that the Debtor failed to provide proof that the Real Property Taxes have been paid for 2019. JPMorgan Chase Bank asserts that the Debtor failed to assert that any Homeowners Association Fees and/or Dues are current. JPMorgan Chase Bank complains that the monthly operating reports attached to the Disclosure Statement fail to itemize receipts from the rental property which is encumbered by Class 6. According to JPMorgan Chase Bank, National Association, the Debtor fails to include any financial information for "Mr. Hall" who is allegedly assisting the Debtor in order to make the case feasible however no such information is disclosed. Attorney for the Secured Creditor: Steven G. Powrozek Shapiro, Fishman & Gaché, LLP 4630 Woodland Corporate Blvd. Suite 100 Tampa, FL 33614 Telephone: 813-367-5813 Fax: (813) 880-8800 E-mail: spowrozek@logs.com About Legacy JH762 LLC Legacy JH762, LLC owns three real properties in Pinehurst, N.C. and Jupiter, Fla., having a total comparable sale value of $5.1 million. Legacy JH762 filed a voluntary petition under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 19-16308) on May 23, 2019. In the petition signed by James W. Hall, managing member, the Debtor was estimated to have $5,100,100 in assets and $3,456,044 in liabilities. David L. Merrill, Esq., at The Associates, is the Debtor's counsel. LEVI STRAUSS: Fitch Lowers LongTerm IDR to BB, Outlook Negative --------------------------------------------------------------- Fitch Ratings has downgraded Levi Strauss & Co.'s ratings, including the Long-Term Issuer Default Rating (IDR) to 'BB' from 'BB+'. The Rating Outlook is Negative. The downgrade and Negative Outlook reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around 7x in fiscal 2020 (ending November 2020) from 3.1x in fiscal 2019 based on EBITDA declining to approximately USD175 million from approximately USD750 million in fiscal 2019 on a nearly 25% sales decline to USD4.4 billion. Adjusted leverage is expected to be around 4.0x in fiscal 2021, assuming sales declines of around 10% and EBITDA declines of around 25% from fiscal 2019 levels. Leverage is unlikely to return to fiscal 2019 levels in fiscal 2022 even assuming a sustained topline recovery. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Levi has sufficient liquidity to manage operations through this downturn. The company ended its fiscal 2019 with USD1 billion of cash and no borrowings on its USD850 million revolving credit facility. The company's next debt maturity is in 2025; its revolving credit facility matures in May 2022. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the global consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retailer stores and restaurants in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak, timeframe for a full reopening of retail locations and the cadence at which it is achieved, economic conditions exiting the pandemic including unemployment and household income trends, impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch envisages a scenario where discretionary retailers (in the U.S.) are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid- to high-single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expects total 2021 sales could remain 8%-10% below 2019 levels. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, yielding 2022 as a growth year. Assuming this scenario, Fitch expects Levi's revenue to decline around 25% in fiscal 2020 with EBITDA declines approaching 75%. In fiscal 2021, Fitch expects revenue to decline around 10%, with EBITDA down around 25% relative to fiscal 2019 levels. To date, Levi has only announced temporary store closures, and Fitch expects the company could detail further plans on its 1Q call scheduled April 7, 2020. Levi generated approximately USD120 million in FCF after dividends in fiscal 2019, after a negative USD80 million swing in receivables. Fitch projects a potential USD500 million reduction to EBITDA in fiscal 2020, with cash flow reductions mitigated by reductions to cash taxes, neutral to positive working capital swings, and potential proactive reductions to capex, originally planned at USD210 million for the year. The company has already guided to a USD130 million dividend in fiscal 2020. Given these assumptions, Levi's FCF could be an outflow of around USD100 million in fiscal 2020 before returning to a modest inflow in fiscal 2021. Strong Historical Top-Line Growth: Levi's top-line accelerated in fiscals 2017 and 2018, with 8% revenue growth in fiscal 2017 and 14% in fiscal 2018 following modestly positive constant-currency growth the prior few years. Constant currency growth moderated somewhat in fiscal 2019 but was still strong at 6%, despite the negative impact of a calendar shift which moved Black Friday into Levi's fiscal 2020. The company's merchandising and branding efforts are bearing fruit, with strong growth across categories and geographies. Levi's brand and offering are clearly trend-right currently, and the company is successfully exploiting opportunities to capitalize on this momentum through new product assortments, brand and celebrity collaborations, and square-footage expansion. Levi's positive constant currency growth over the past five years is evidence of the company's somewhat resilient business model in the face of apparel industry volatility, particularly for U.S. brick-and-mortar mid-tier apparel retailers. The company's product portfolio is primarily basic denim product, which is more replenishment-oriented and relatively less susceptible to fashion trend changes over time. The company is also broadly distributed across retail channels, including department store and specialty, but also general merchandise/discount and online; thus, Levi is somewhat agnostic to the impact of shifts in shopping channels. Management has outlined three strategic initiatives that should support Fitch's expectation of low single digit positive sales growth over time, despite Levi's somewhat mature business profile. The first is to drive the profitable core businesses and brands through product innovation and strengthened customer relationships. The core businesses are the Levi's men's bottoms business globally, the Dockers brand in the U.S. and key global wholesale accounts, such as Wal-Mart Stores Inc. and J.C. Penney Company, Inc. The second initiative is to expand Levi's presence in less-penetrated product categories and markets. Businesses to expand include men's tops and outerwear, women's and key emerging markets, such as Russia, India and China. Levi's women's line Revel supported growth in recent years, especially in key emerging markets. Finally, Levi plans to grow its company-owned and omnichannel presence. The company's owned retail stores and online channel accounted for 36% of sales in fiscal 2019, with multibrand retailers and franchised Levi's locations accounting for the remaining 64%. Direct-to-consumer online sales were around 5% of total company sales. Levi plans to grow its company-owned and online penetration rates through retail unit expansion and investments in its e-commerce operations to improve the online customer experience and functionality. Evolving Financial Policy: Levi ended 2019 with leverage at 3.1x, significantly lower than the recent peak of 5.3x in fiscal 2011. While some of the improvement was due to EBITDA growth, the company also directed FCF toward debt paydown, reducing debt around 50% to USD1.1 billion beginning fiscal 2012 through the end of fiscal 2016. DERIVATION SUMMARY Levi's downgrade to 'BB' and Negative Outlook reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around 7x in fiscal 2020 from 3.1x in fiscal 2019 based on EBITDA declining to approximately USD175 million from approximately USD750 million in fiscal 2019 on a nearly 25% sales decline to USD4.4 billion. Adjusted leverage is expected to be around 4.0x in 2021, assuming sales declines of around 10% and EBITDA declines of around 25% from 2019 levels. Leverage is unlikely to return to 2019 levels in 2022 even assuming a sustained topline recovery. Levi's ratings continue to reflect the company's position as one of the world's largest branded apparel manufacturers, with broad channel and geographic exposure, while also considering the company's narrow focus on the Levi brand (around 87% of revenue) and in bottoms (around 72% of revenue). The company benefits from its broad distribution across department stores, specialty, mass, and discount, in addition to self-distribution (36% of sales are generated from company-operated stores and its online presence) which somewhat mitigates secular challenges in the U.S. mid-tier apparel industry. The company's financial profile improved in recent years from a focus on expense management and more stable constant currency revenue growth, somewhat mitigated by the negative impact of the strengthening U.S. dollar. Similarly rated apparel and accessories peers include Burlington Stores, Inc. (BB+/Negative), Capri Holdings Limited (BB+/Negative), and Tapestry, Inc. (BB/Negative). Burlington's rating reflects good growth trajectory in both top line and EBITDA given a favorable backdrop of growth in the off-price channel and strong execution, strong FCF and declining leverage. Ratings for Capri and Tapestry reflect their strong U.S positioning and global presence in the handbag and leather goods categories. Like Levi, operations for Capri and Tapestry are dominated by a single brand, which somewhat limits diversification and heightens fashion risk. Both Capri and Tapestry have made leveraging acquisitions in recent years with somewhat disappointing subsequent performance, on continued sluggishness for Capri's Michael Kors brand and a difficult turnaround for Tapestry's acquired Kate Spade brand. Ratings and Negative outlooks for each of these players reflect medium term consumer discretionary spending concerns triggered in part by the coronavirus pandemic. By the end of 2021, adjusted debt/EBITDAR could trend around 4.0x for Burlington and Tapestry, and, assuming some debt reduction, around the mid-3x range for Capri. KEY ASSUMPTIONS Here are Fitch's projections prior to disruption related to coronavirus: -- Fitch projected mid-single digit growth in fiscal 2020 due partly to a calendar shift, followed by low-single digit growth beginning fiscal 2021. Revenue was expected to expand from USD5.8 billion toward USD6.3 billion in fiscal 2022. -- EBITDA growth was forecast to generally follow revenue, with expansion from approximately $750 million in fiscal 2019 toward $850 million in fiscal 2022; margins were expected to remain near the 13% recorded in fiscal 2019. -- FCF was projected in the mid-USD200 million range annually, higher than the USD120 million in fiscal 2019 on lower working capital swings, and could have been used for share buybacks or tuck-in acquisitions. Adjusted debt/EBITDAR, which was 3.1x in fiscal 2019, was expected to trend near this level over the medium term. Here are Fitch's revised projections reflecting the significant business interruption from coronavirus and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch projects Levi's fiscal 2020 revenue could decline around 25% to USD4.4 billion and EBITDA could decline up to 75% to around USD175 million, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. While fiscal 2021 revenue and EBITDA should significantly rebound from depressed fiscal 2020 levels, Fitch expects fiscal 2021 revenue of approximately USD5.1 billion and EBITDA of around USD550 million to be approximately 10% and 25% below fiscal 2019 levels given that a downturn could adversely impact discretionary spending through fiscal 2021. Fitch's revenue expectations reflect its views that global retail discretionary spending will decline around 40% in 1H calendar 2020, decline mid- to high- single digits in 2H 2020, and sales in calendar 2021 will be down 8% to 10% from 2019 levels. -- Beginning fiscal 2022, Levi could resume low-single digit growth, in line with Fitch's prior projection. -- FCF in fiscal 2020 could be an outflow in the low-USD100 million range from an inflow of around USD125 million in fiscal 2019, largely due to a nearly USD600 million reduction in EBITDA, mitigated by lower cash taxes improved working capital swings. FCF in fiscal 2021 could improve to the USD50 million to USD100 million range. Levi has approved a USD130 million dividend to be paid in fiscal 2020 and Fitch assumes this grows 10% annually. The company has no maturities until 2022, when its revolver matures; Levi's next notes maturity is 2025. -- Adjusted debt/EBITDAR, which was 3.1x in fiscal 2019, could climb to around 7.0x in fiscal 2020 and decline to around 4.0x in fiscal 2021 on EBITDA swings. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- A positive rating action would be considered if Levi's operating trajectory exceeded Fitch's expectations, yielding EBITDA around USD700 million and consequently adjusted debt/EBITDAR (capitalizing leases at 8x) below 3.5;. -- Fitch could stabilize Levi's outlook with greater confidence that the company could stabilize EBITDA above the mid-USD500 million range, yielding adjusted debt/EBITDAR trending below 4.0x. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A negative rating action would be considered top-line weakness caused EBITDA to sustain below the mid-USD500 million range, resulting in sustained adjusted debt/EBITDAR over 4.0x. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Levi's liquidity is strong, supported by cash on hand of USD934 million and revolver availability of USD820 million as of Nov. 24, 2019. The USD850 million revolving credit facility is secured by U.S. and Canadian inventories, receivables and the U.S. Levi trademark, and benefits from upstream guarantees from the domestic operating companies. Availability is subject to a borrowing base, essentially defined as 95% of credit card receivables, plus 85% of net eligible accounts receivable, plus 50% of raw materials inventory, plus 95% of finished goods inventory, plus 100% of cash in the collateral account and the U.S. Levi trademark. RECOVERY CONSIDERATIONS Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. Fitch assigned a 'BBB-'/'RR1' rating to Levi's ABL revolver, whose availability is subject to a borrowing base essentially defined as 90% of credit card receivables, plus 85% of net eligible accounts receivable, plus 50% of raw materials inventory, plus 95% of finished goods inventory, plus 100% of cash in the collateral account and the U.S. Levi trademark. The ABL revolver would be expected to have outstanding (91%-100%) recovery prospects in the event of default. Fitch assigned a 'BB'/'RR4' rating to Levi's unsecured notes, indicating average (31%-50%) recovery prospects. SUMMARY OF FINANCIAL ADJUSTMENTS -- In 2019, Fitch added back USD55 million in non-cash stock-based compensation as well USD3.5 million in one-time IPO costs to its EBITDA calculation. -- Fitch has adjusted the historical and projected debt by adding 8x yearly operating lease expense. LINDBLAD EXPEDITIONS: Moody's Lowers CFR to B3, Outlook Negative ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Lindblad Expeditions, LLC including its Corporate Family Rating to B3 from B1, its Probability of Default Rating to Caa1-PD from B2-PD, its senior secured rating to B3 from B1, and its Speculative Grade Liquidity rating to SGL-3 from SGL-1. The outlook is negative. This concludes the rating review that was initiated on March 11. "The downgrade reflects the unprecedented impact the global spread of the coronavirus (COVID-19) is having on the cruise industry, including the suspension of all sailing for Lindblad through the end of April," stated Pete Trombetta, Moody's lodging and cruise analyst. "Its base case assumption is that the Lindblad's operations are suspended at least partially through June 30, resulting in highly negative free cash flow, and that there will be a slow recovery when sailings resume. While Moody's expects that earnings will improve in 2021, Moody's anticipates that bookings will be weak relative to 2019, which will result in Lindblad's debt/EBITDA approximating 5.0x as of year-end 2021," added Trombetta. Downgrades: Issuer: Lindblad Expeditions, LLC Probability of Default Rating, Downgraded to Caa1-PD from B2-PD Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-1 Corporate Family Rating, Downgraded to B3 from B1 Senior Secured Bank Credit Facility, Downgraded to B3 (LGD3) from B1 (LGD3) Outlook Actions: Issuer: Lindblad Expeditions, LLC Outlook, Changed To Negative From Rating Under Review RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The cruise sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Lindblad's credit profile, including its exposure to increased travel restrictions for US citizens which represents a majority of the company's revenue and earnings have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Lindblad from the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Lindblad's credit profile benefits from its partnerships with National Geographic and the World Wildlife Fund (through its Natural Habitats brand), as well as its strong brand name recognition in the expedition travel segment of the travel industry. Also benefiting Lindblad, under normal conditions, is the strong demand for high end expedition cruises, which combined with the unique destinations Lindblad travels to, results in high net yields relative to other luxury cruise lines. Longer term, Moody's expects the demand for these types of cruises will return to prior levels although there will be an extended recovery period. In the short run, Lindblad's credit profile will be dominated by the length of time that cruise operations continue to be highly disrupted and the resulting impacts on the company's cash consumption and its liquidity profile. The normal ongoing credit risks include its small scale in terms of absolute level of earnings and number of vessels which exposes the company to earnings pressure should the company experience unexpected dry dockings or canceled voyages as it did in 2017. Due to the company's small scale, Moody's expects it to maintain stronger metrics than its B3 rating. Moody's considers governance risk is benign as evidenced by a balanced use of free cash to grow its fleet and modest returns to shareholders. The negative outlook reflects Moody's view that if operations are suspended longer than its base case assumption, the company's cash burn could lead to liquidity issues without some form of support or additional liquidity. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if the company's liquidity deteriorated or if operations were to be suspended beyond its base case. The outlook could be revised to stable if the company's liquidity were to be improved or the company received some form of support through the CARES Act. Although not likely in the near term, ratings could be upgraded if debt/EBITDA were to improve and be sustained below 5.5x with EBITA/interest coverage of above 2.0x. Lindblad Expeditions, LLC and its consolidated subsidiaries (Nasdaq: LIND), headquartered in New York, NY, is a provider of tour and adventure travel related services to over 40 destinations on six continents. The company owns and operates eight expedition ships and five seasonal charter vessels with capacities ranging from roughly 25 to 150 guests per voyage. Lindblad generated sales of about $345 million in 2019. LIP INC: Court Approves Disclosure Statement -------------------------------------------- Judge Marian F Harrison has ordered that the Disclosure Statement filed by LIP, INC., et al., the Debtor in this case, is approved. May 1, 2020 is fixed as the last day for filing written acceptances or rejections of the Plans. May 1, 2020 is fixed as the last day for filing and serving written objections to confirmation of the Plans. The hearing on confirmation of the Plans shall be held on May 19, 2020, at 9:00 a.m. in Courtroom 3, U.S. Bankruptcy Court for Middle District of Tennessee, Second Floor, Customs House, 701 Broadway, Nashville, Tennessee 37203.2 Within three (3) business days following entry of this Order, Debtors’ counsel shall serve copies of this Order, the Plan (as appropriate for each creditor), the approved Disclosure Statement, and a ballot conforming to Official Form 314 on all creditors. Counsel for the Debtors: Griffin S. Dunham R. Alex Payne DUNHAM HILDEBRAND, PLLC 2416 21st Avenue South, Suite 303 Nashville, Tennessee 37212 Tel: 629.777.6529 E-mail: alex@dhnashville.com About LIP Inc. LIP, Inc., doing business as Mellow Mushroom Vanderbilt, and its subsidiaries are privately held companies that operate in the restaurant industry. LIP and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. M.D. Tenn. Lead Case No. 19-05784) on Sept. 9, 2019. In the petitions signed by Mark Clark, president, the Debtors were each estimated to have assets ranging between $100,000 and $500,000 and liabilities ranging between $1 million and $10 million. Dunham Hilderbrand, PLLC is the Debtors' counsel. LITHIA MOTORS: Moody's Affirms 'Ba1' CFR, Outlook Stable -------------------------------------------------------- Moody's Investors Service, Inc. affirmed all ratings of Lithia Motors, Inc. including the Ba1 corporate family rating and Ba2 senior unsecured bond rating. The Speculative Grade Liquidity Rating remains unchanged at SGL-2. The outlook is stable. "Its affirmation considers Lithia's flexible business model, which derives the bulk of its profits from used vehicle sales, parts & service, and finance & insurance, with new vehicle sales, while representing over 50% of revenue, only represent around 20% of gross profit," stated Moody's Lead Lithia Analyst Charlie O'Shea. "Lithia's operating costs are very flexible, especially those involved in vehicle sales, so consistent with the 2008-09 recession, as sales drop, Moody's expects compensation costs to drop as well," continued O'Shea. "Inventory will be managed to meet any shifts in consumer demand, and capital expenditures can be rationalized as well, which will preserve both liquidity and credit metrics such that downgrade triggers should not be breached," added O'Shea. Affirmations: Issuer: Lithia Motors, Inc. Probability of Default Rating, Affirmed Ba1-PD Corporate Family Rating, Affirmed Ba1 Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD5) Outlook Actions: Issuer: Lithia Motors, Inc. Outlook, Remains Stable RATINGS RATIONALE Lithia's Ba1 rating considers its strong credit metrics, its good liquidity, meaningful scale and leading competitive position in its chosen markets. The rating is supported by favorable governance considerations specifically maintaining low leverage and good liquidity. Moody's expects Lithia to continue to generate strong free cash flow which will be used for acquisitions, share repurchases, dividends and some debt reduction. In the event of a macroeconomic slowdown, such as at present, Moody's expects Lithia to be able to flex its operations to largely ensure maintenance of its current quantitative profile. The stable outlook reflects Moody's expectation that Lithia will maintain good liquidity and manage its financial policy and acquisition strategy to ensure that its credit metrics remain strong even in the event of an economic downturn. Factors that would lead to an upgrade or downgrade of the ratings: An upgrade would require Lithia to flawlessly source, price, and integrate any future acquisitions and maintain operating performance and financial policy such that debt/EBITDA was sustained below 3 times and EBIT/Interest was sustained above 6 times. Ratings could be downgraded if either a deterioration in operating performance or financial policy decisions resulted in weakening of liquidity or credit metrics evidenced by debt/EBITDA sustained above 4.5 times EBIT/Interest sustained below 4 times. The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. New auto sales have been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. Lithia is therefore impacted, and Moody's notes that it has a meaningful dealership proportion in California and New Jersey, both of which are among the most affected by coronavirus. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Lithia Motors, Inc., headquartered in Medford, OR, is a leading auto retailer with 188 stores across 20 states. Annual revenues are around $13 billion. LITTLE FEET: Plan & Disclosure Hearing Reset to May 14 ------------------------------------------------------ March 19, 2020, is the hearing on final approval of the Disclosure Statement and Confirmation of the Plan of Reorganization filed by Debtor Little Feet Learning Center, LLC with the U.S. Bankruptcy Court for the Southern District of Mississippi. The Court finds that the hearing should be rescheduled to May 14, 2020 at 1:30. p.m. for reasons relating to the coronavirus pandemic and the Special Order entered by the United States District Court for the Southern District of Mississippi on March 13, 2020, by decision of the Board of Judges. Judge Katharine M. Samson ordered that the final hearing on approval of the Disclosure Statement and for the hearing on Confirmation of the Plan of Reorganization is continued and rescheduled to May 14, 2020, at 1:30 p.m. in the Bankruptcy Courtroom, 7th Floor, Dan M. Russell, Jr. U.S. Courthouse, 2012 15th Street, Gulfport, Mississippi. A full-text copy of the order dated March 17, 2020, is available at https://tinyurl.com/yx2mp93x from PacerMonitor at no charge. About Little Feet Learning Center Little Feet Learning Center filed a voluntary Chapter 11 petition (Bankr. S.D. Miss. Case No. 19-52507) on Dec. 18, 2019, listing under $1 million in both assets and liabilities, and is represented by W. Jarrett Little, Esq. and William J. Little, Jr., Esq., at Lentz & Little, PA. LOANCORE CAPITAL: S&P Alters Outlook to Neg., Affirms 'B+' ICR -------------------------------------------------------------- S&P Global Ratings said it revised its outlook on Loancore Capital Markets LLC (LCM) to negative from stable. At the same time, S&P affirmed its 'B+' issuer credit rating on the company. The fallout from COVID-19 has increased the risk that LCM experiences losses and receives margin calls on its securities and loan portfolio investments. The company depends on its secured repurchase facilities, which are backed by mortgage loans, participation interests, and CMBS, to finance the origination and purchase of CRE loans for securitization. LCM's draws on these facilities fluctuate around the timing of originations and securitizations; as of Aug. 31, 2019, the company had $430 million of borrowings under the facilities, but, as of Nov. 30, 2019, the amount drawn was $152 million as a result of a securitization that LCM completed in late 2019. The company also ended November 2019 with approximately $51 million of approved and undrawn capacity on its repurchase agreements. "We believe that increased spreads on CMBS facilities could lead to margin calls in the short term, while the potential credit deterioration in LCM's loan portfolio could also result in margin calls. The company is focused on originating and purchasing office, multifamily, retail, industrial, and hospitality mortgage loans in metropolitan areas mostly on the east and west coasts of the U.S., and the company held approximately $489 million of loans for sale as of Nov. 30, 2019. We believe the value of these assets could deteriorate in the current uncertain environment. Favorably, LCM has shifted away from higher-risk transitional loans since 2017, which reduces credit risk," S&P said. "The negative outlook reflects our view that, over the next 12 months, the current difficult operating environment may result in deterioration in prices or confidence in CRE markets that could lead to loan losses, margin calls on repurchase facilities, and stress on earnings. We expect leverage to fluctuate according to the timing of originations and securitizations but to remain below 4.5x. We expect the company will address the June 2020 maturity of its $300 million senior unsecured notes by May 2020," the rating agency said. S&P could lower the ratings over the next six to 12 months if: -- Declining CRE property valuations and weakening loan performance strain liquidity, -- LCM increases leverage materially, or -- The company suffers material losses or profitability issues, or asset quality deteriorates. S&P could revise the outlook to stable over the next six to 12 months if the macroeconomic environment improves, the company's liquidity remains adequate asset quality is relatively stable, and leverage remains within its expectations. MACY'S INC: Fitch Lowers LongTerm IDR to BB+, Outlook Negative -------------------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Rating (IDR) for Macy's Inc. to 'BB+' from 'BBB-'. The Rating Outlook is Negative. The downgrade and Negative Outlook reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in leverage to over 11x in 2020 from 2.9x in 2019, based on EBITDA declining to around $325 million from $2.2 billion on a revenue decline of nearly 25% to $19.2 billion. Adjusted leverage is expected to be in the low 4x in 2021, assuming revenue declines of over 15% and EBITDA declines of approximately 40% from 2019 levels. Leverage could return to the low 3x in 2022 assuming a sustained topline recovery. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Macy's has sufficient liquidity to manage operations through this downturn. The company ended 2019 with $685 million of cash and recently drew fully on its $1.5 billion unsecured revolver. The company has approximately $530 million of debt maturing in January 2021 and $450 million maturing in January 2022, which Fitch expects it could pay down with the recent drawdown on the revolver. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retail stores in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved; and the economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch has assumed a scenario where discretionary retailers in the U.S. are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid-to-high single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expect total 2021discrectionary sales could remain 8%-10% below 2019 levels. Fitch has forecasted that department store sales, which have been on a secular decline, will fare worse with 2021 sales projected to decline in the low to mid-teens. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, with 2022 projected as a modest growth year. Assuming this scenario, Fitch expects Macy's revenue to decline nearly 25% in 2020 with EBITDA declining to approximately $325 million from $2.2 billion in 2019. In 2021, Fitch expects revenue to decline of over 15% and EBITDA to decline approximately 40% from 2019 levels. Actions taken by Macy's: On March 19, 2020, Macy's drew down on its entire $1.5 billion credit facility due to expire in May 2024 and suspended its dividend ($1.51 per share or approximately $470 million annually) beginning the second quarter of 2020. The company could look to further cut expenses beyond those announced as part of its restructuring plan in February 2020, reduce inventory receipts especially as it goes into the important holiday season and significantly pull back on capital expenditures. Fitch has assumed that it could reduce its initially targeted capex of $1 billion for 2020 by half. Business Model Evolution: While most U.S. brick-and-mortar retailers are battling competitive incursion from online and value-oriented players, sales weakness is most pronounced for mid-tier apparel and accessories retailers. While leading players such as Macy's, Kohl's and Nordstrom have been able to largely offset decline in in-store sales through the growth in their e-commerce businesses, retailers are forced to invest heavily in omnichannel platforms, which have driven down EBITDA margins and reduced cash flow. Successful retailers in the space are investing in the omnichannel model, rightsizing their store footprint, and have a differentiated product and service offering, including a well-developed value message, to draw customers in. Financially and operationally stronger department stores should be able to at least maintain their share of the apparel and accessories space over the longer term. These companies are expected to benefit from store closings and restructuring activity from cash-constrained specialty apparel players and department stores, which could further accelerate in a downturn environment. Longer term, Fitch views Macy's as well positioned to gain share in the mid-tier department store space as it continues to invest in its omnichannel and other growth initiatives. In recent years, the company has proactively rationalized its store footprint and reduced its cost structure, using the expense savings and proceeds from real estate monetization to invest in its digital business, store-related growth strategies, its relaunched loyalty program, and expansion of Bluemercury and Macy's Backstage. The company also benefits from relationships with key national brand vendors, especially given more acute challenges elsewhere in the department store sector. Intensified Strategy Highlights Secular Challenges: In light of ongoing issues and lackluster 2019 performance, management announced a three-year plan, which accelerates its recent strategy of real estate rationalization, cost structure optimization and targeted business re-investment. Major elements of the plan include the closure of 125 (or around 20%) of Macy's lower-volume stores, primarily in secondary or tertiary markets, to focus management attention on its best performing assets. These stores produce approximately $1.4 billion of revenue (less than 10% of 2019 total) and Fitch assumes minimal EBITDA, and real estate sales are expected to be a continued source of debt reduction over the medium term. Macy's has targeted $700 million in asset sale proceeds over the next three years; near term this could get adversely impacted by dislocation in discretionary retail sales. Fitch expects the 125 store closures could have major repercussions for the affected malls, particularly if reduced traffic and co-tenancy clauses combine to trigger further tenant departures and accelerated reshaping of the mall landscape. As an industry leader, Macy's could stand to benefit if these closures yield another round of broader closures of Macy's weaker competitors in the apparel and accessories space. The company continues to experiment with new and off-mall formats. The company had planned to expand its portfolio of standalone off-price Backstage stores and test a new department store concept called Market by Macy's, both in off-mall locations. As part of its February analyst day, the company shared its target of $1.5 billion in reductions to its cost structure. The company has also targeted major savings in areas like supply chain optimization, store expense reduction and marketing expense efficiency. Gross margin opportunities total $600 million, while SG&A opportunities provide the remaining $900 million. The company also announced New York City will become the company's sole corporate headquarters in a sweep of campus consolidation and headcount reduction. The $1.5 billion in cost reductions is designed to provide Macy's with around $1 billion of business reinvestment opportunity. Major areas of focus include Macy's digital business, strengthening customer relationships, in-store enhancements, and private label expansion. Macy's e-commerce business is around $6 billion, or 25% of sales, and the company is targeting continued growth through site upgrades, improving its mobile app, expanding omnichannel attributes such as in-store pickup of online orders, and potential new features like recommerce and customizable fashion. While Fitch acknowledges Macy's proactive approach to real estate portfolio rationalization and efforts to invest in defending share, the heightened retrenchment of the store base and cost cutting required to stabilize operations is evidence of the dislocation in the business and ongoing secular pressure. In addition, a number of these initiatives could be put on hold to preserve liquidity given the current situation. EBITDA Maintains Downward Trajectory: EBITDA in 2019 declined 13% to $2.2 billion given a 0.8% comparable store sales decline and margin declining to 8.6% from 9.8% in 2018. Prior to the recent disruption, Fitch had expected merchandise revenue to decline below $23 billion over the next two to three years on modest comp declines and store closures, and for EBITDA to decline under $2.0 billion over the next three years despite cost reduction efforts. Macy's has paid down over $3 billion in debt over the past four years since 2016, with adjusted debt/EBITDAR ending at 2.9x in 2019. Macy's financial discipline and adherence to its publicly stated financial policy (leverage of 2.5x to 2.8x, or 2.4x to 2.7x on a Fitch-calculated basis) supported the company's credit profile in the face of operational challenges, although Fitch expects it could be outside of this range through 2022. DERIVATION SUMMARY The rating downgrades and Outlook revisions for the department stores reflect the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021. Kohl's, Nordstrom, Macy's and Dillard's are expected to have sufficient liquidity to manage operations through this downturn, should Fitch's projections come to fruition. Macy's U.S. department store peers include Dillard's, Inc., Nordstrom, Inc., Kohl's Corporation. and J.C. Penney Company, Inc. Macy's (BB+/Negative): Fitch anticipates a sharp increase in leverage to over 11x in 2020 from 2.9x in 2019, based on EBITDA declining to approximately $325 million from $2 billion on a revenue decline of nearly 25% to $19.2 billion. Adjusted leverage is expected to be around 4x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Leverage could return to 3x in 2022 assuming a sustained topline recovery. The company ended 2019 with $685 million of cash and recently drew fully on its $1.5 billion unsecured revolver. The company has approximately $530 million of debt maturing in January 2021 and $450 million maturing in January 2022, which Fitch expects Macy's will pay with cash on hand, given the recent drawdown on its $1.5 billion credit facility. Macy's ratings continue to reflect its position as the largest department store chain in the U.S. and Fitch's view of a prolonged timeframe for the company's operating trajectory to stabilize on a lower EBITDA base, given weak mall traffic and heightened competition from alternate channels that include online and off-price. This follows sustained low single digit comparable store sales declines, recent EBITDA margins well below expectations and increased management urgency to address secular challenges, as evidenced by the announcement of 125 store closures and $1.5 billion in cost reductions to support business reinvestment, prior to the recent downturn. Nordstrom (BBB/Negative): Fitch projects adjusted leverage increasing to 7x in 2020 from 3x in 2019, based on EBITDA declining to approximately $550 million from $1.6 billion on a sales revenue decline of over 20% to $12 billion. Adjusted leverage is expected to decline to the low 3x in 2021, assuming sales declines of around 10% and EBITDA declines of around 20% in 2021 from 2019 levels. Nordstrom's ratings reflect its position as a market share consolidator in the apparel, footwear and accessories space, with its differentiated merchandise and high level of customer service enabling the company to enjoy strong customer loyalty. The company has a well-developed product offering across a diverse portfolio of full line department stores, off-price Nordstrom Rack locations and multiple online channels. Kohl's (BBB-/Negative): Fitch anticipates Kohl's leverage to increase to over 6x in 2020 from 2.3x in 2019, based on EBITDA declining to approximately $550 million from $2 billion on a sales decline of 20% to under $16 billion. Adjusted leverage is expected to be in the mid 3x in 2021, assuming revenue declines of around 15% and EBITDA declines of around 40% in 2021 from 2019 levels. Kohl's ratings reflect its position as the second largest department store in the U.S. and Fitch's expectation that the company should be able to able to accelerate market share gains post the discretionary downturn. Kohl's has a well-developed omnichannel strategy, with online sales contributing close to 25% of total revenue which should benefit its top-line as retail sales continue to move online. Kohl's off-mall real estate footprint provides some insulation from mall traffic challenges. Dillard's (BB/Negative): Fitch anticipates EBITDA dropping to under $50 million in 2020 from $392 million in 2019 on a revenue decline of over 20% to $5 billion. Adjusted leverage is expected to be over 2x in 2021, assuming sales declines in the low-teens and EBITDA of approximately $300 million or around 30% lower compared to 2019 levels. Dillard's ratings reflect the company's below-industry-average sales productivity (as measured by sales psf), operating profitability and geographical concentration relative to its larger department store peers, Kohl's, Nordstrom and Macy's. The ratings consider Dillard's strong liquidity and minimal debt maturities, with adjusted debt/EBITDAR expected to return to the 2x range in 2021. J.C. Penney (CCC-): Fitch expects J.C. Penney's EBITDA could turn materially negative in 2020 in the range of negative $400 million. While the company ended 2019 with $1.8 billion in liquidity (cash and revolver), the significant disruption from coronavirus have led to heightened liquidity concerns over the next 12 months given the projected cash burn. KEY ASSUMPTIONS Here are Fitch's projections prior to disruption related to coronavirus: -- Top-line to decline more sharply in 2020 in the mid-single digits driven by negative low-single digit comps, given the disruption from store closings and disruptions from its restructuring initiatives. Declines moderate in 2021 and beyond with top-line contraction of 1% to 2%. -- EBITDA decline of 5% in 2020 from $2.2 billion in 2019 with continued low-to-mid single digit declines thereafter to under $2 billion in 2021, with EBITDA margins in the low 8% range. -- FCF after dividends to be modestly negative in 2020 due to cash restructuring charges, and modestly positive thereafter given dividends of $470 million and capex spend of $1 billion annually. This excludes a projected $700 million in net proceeds from asset sales through 2022. -- Adjusted debt/EBITDAR to remain in the high 2x range, as EBITDA declines are mitigated by proactive debt reduction. Here are Fitch's revised projections reflecting the significant business interruption from COVID-19 and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch projects Macy's 2020 revenue could decline nearly 25% to $19.2 billion and EBITDA could decline to approximately $325 million from $2.2 billion, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. While 2021 revenue and EBITDA should significantly rebound from depressed 2020 levels, Fitch expects 2021 revenue of approximately $21 billion and EBITDA of around $1.3 billion to be over 15% and approximately 40%, respectively, lower than 2019 levels given Fitch's expectations of a likely downturn in discretionary spending that could extend well into late 2021. Fitch's revenue expectations reflect its views that retail discretionary spending will decline 40% in first half 2020, be down mid-to-high single digits in second half 2020, and sales in 2021 will be down 8%-10% from 2019 levels, with declines in department store sales more material on a relative basis. -- Beginning 2022, Macy's could resume low-single digit topline and EBITDA growth. -- FCF is expected to be approximately negative $700 million in 2020, largely due to a $1.9 billion reduction in EBITDA, somewhat mitigated by lower cash taxes, significantly reduced capex and potential working capital benefit. FCF in 2021 could approach positive $300 million as EBITDA improves. -- Adjusted debt/EBITDAR, which was 2.9x in 2019, could climb to over 11x in 2020 and decline to the low 4.0x range in 2021 on EBITDA swings. Adjusted debt/EBITDAR in 2020 is impacted by around 2.0x from Macy's decision to draw $1.5 billion on its revolver. The company has approximately $530 million of debt maturing in January 2021 and $450 million maturing in January 2022, which Fitch expects it could pay down with the recent drawdown on the revolver. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action --A stabilization case would require Macy's to meet Fitch's revised projections that include EBITDA increasing to $1.3 billion in 2021 and adjusted debt/EBITDAR moderating to the low 4x in 2021 and under 3.5x in 2022. --An upgrade, although unlikely at this point, could occur from sustained low single digit positive comps, EBITDA growth in the low to mid-single digits with EBITDA margins in the high single digits beginning 2022, combined with adjusted debt/EBITDAR in the low 3x. Developments That May, Individually or Collectively, Lead to Negative Rating Action --A negative rating action could result on a more protracted or severe downturn and reduced confidence In Macy's ability to return to top line and profitability growth in 2022 such that adjusted debt/EBITDAR is sustained above 4x. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Macy's ended 2019 with a cash balance of $685 million. On March 20, 2020, the company announced it had fully borrowed on its $1.5 billion revolver to enhance liquidity. Additionally, it announced that it would suspend its quarterly dividend beginning the second quarter of 2020. Should Fitch's projections come to fruition, Macy's has sufficient liquidity to manage operations through this downturn. The company has approximately $530 million of debt maturing in January 2021 and $450 million maturing in January 2022, which Fitch expects Macy's will pay with cash on hand, given the recent drawdown on its $1.5 billion credit facility. RECOVERY CONSIDERATIONS Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. The $1.5 billion senior unsecured revolver and the senior unsecured notes are rated 'BB+'/'RR4', indicating average (31%-50%) recovery prospects. SUMMARY OF FINANCIAL ADJUSTMENTS - EBITDA adjusted for stock-based compensation - Operating lease expense capitalized by 8x for historical and projected adjusted debt. MAD DOGG ATHLETICS: To Seek Approval of 51% Plan on June 8 ---------------------------------------------------------- Debtor Mad Dogg Athletics, Inc., filed a First Amended Plan of Reorganization and a First Amended Disclosure Statement on March 20, 2020. The hearing to confirm the Plan has been scheduled for June 8, 2020, at 10:00 a.m. (Pacific Standard Time), or as soon thereafter as the matter may be heard, and, if necessary, shall continue on June 12, 2020, at 10:00 a.m. (Pacific Standard Time), in Courtroom 1375 of the United States Bankruptcy Court, 255 East Temple Street, Los Angeles, California 90012, before the Honorable Julia W. Brand, United States Bankruptcy Judge, presiding. Based on discussions between the Debtor and the Committee, the Debtor believes, and anticipates, that the Committee will have no objections to, and will support, approval of the Disclosure Statement and confirmation of the Plan. The Debtor has operated profitably for 24 of its 25 years. A confluence of seemingly one-time events between 2016 and 2018 resulted in a disastrous year. The Debtor continues to face cash flow challenges and needs to bring certain key initiatives to completion (website, digital subscription platform, Spinning app, supply chain improvements, and manufacturing improvements at Hart Wood), and resolve the issues with Union Bank. A restructuring of the Debtor's operations and debt through the Plan should provide a solid foundation for rebuilding the company over time. Holders of general unsecured claims in Class 9 will receive 51% of the allowed amount of their claims, payable over a period of three years following the Effective Date, without interest, in quarterly installments of equal amounts (collectively, "GUC Quarterly Payments"), with the first GUC Quarterly Payment to be made the later of: (i) March 31, 2020, or (ii) 30 days after the Effective Date. Each holder of an Allowed Claim in this Class shall receive their Pro Rata share of each GUC Quarterly Payment. A full-text copy of the Amended Disclosure Statement dated March 20, 2020, is available at https://tinyurl.com/wa2w8dt from PacerMonitor at no charge. The Debtor is represented by: David S. Kupetz Asa S. Hami Cathy Ta SulmeyerKupetz 333 South Grand Avenue, Suite 3400 Los Angeles, California 90071 Telephone: 213.626.2311 Facsimile: 213.629.4520 E-mail: dkupetz@sulmeyerlaw.com ahami@sulmeyerlaw.com cta@sulmeyerlaw.com About Mad Dogg Athletics Mad Dogg Athletics, Inc. -- https://www.maddogg.com/ -- offers a comprehensive portfolio of fitness equipment, programming, and education. The company manufactures home Spinner bikes, Pilates and functional training equipment, and a complete line of Spinning-branded apparel and accessories. With its business founded in 1994 in Los Angeles, California, Mad Dogg operates from its corporate headquarters in Venice, California. Mad Dogg Athletics sought Chapter 11 protection (Bankr. C.D. Cal.Case No. 19-18730) on July 26, 2019. In the petition signed by CEO John R. Baudhuin, the Debtor was estimated to have $1 million to $10 million in assets and $10 million to $50 million in liabilities. The case is assigned to Judge Julia W. Brand. David S. Kupetz, Esq., at SULMEYER KUPETZ, serves as the Debtor's bankruptcy counsel. Ardent Law Group, P.C., is special litigation counsel. MAG DS: Moody's Assigns B3 CFR & Rates 1st Lien Loans B3 -------------------------------------------------------- Moody's Investors Service has assigned initial ratings for MAG DS Corp, including a B3 corporate family rating and B3-PD probability of default rating, and B3 ratings for the company's first lien credit facilities. The ratings outlook is stable. Net proceeds from the planned $285 million term loan will refinance the company's existing debt and fund the pending acquisition of AASKI Technology Inc. According to lead analyst, Bruce Herskovics, "the assigned ratings broadly reflect the company's high initial financial leverage and high degree of revenue concentration, but also consider the competitive benefits that MAG should gain through AASKI's portfolio of multi-award contracts." "The greater scale and qualifications should help MAG bid as a lead contractor more frequently, and Moody's expects rapid demand growth for situation awareness support services across the US defense, border patrol and law enforcement communities to bolster opportunities for the company in the coming years," added Herskovics. RATINGS RATIONALE The B3 CFR considers the company's high financial leverage, with contract concentration and potential for pronounced working capital absorption somewhat mitigated by high backlog, strong technical qualifications and promising revenue synergies. Calculation of initial credit metrics pro forma for the pending debt recapitalization and acquisition of AASKI is complicated by contracts recently awarded and non-recurring costs, but Moody's estimates initial leverage in the mid-6x range on an adjusted debt-to-EBITDA basis, with run-rate free cash flow-to-debt approximating 3% to 5%. However, MAG may achieve stronger year-one free cash flow leverage (above 10%) due to a one-time release of significant working capital from an aircraft integration contract that is underway. Depending on the allocation of free cash flow going forward, leverage could be below 6x in year two. About 40% of the revenue base stems from just five programs (slightly less concentration from an earnings perspective). Contract concentration increases the risk to the business from poor execution or program termination. Offsetting these considerations is a significant contract backlog, which affords some revenue visibility. MAG's ability to more readily bid as a prime contractor in the future will be helped by AASKI's comparatively stronger program management, accounting systems, and business development acumen. The B3 CFR also considers MAG's ownership by a financial sponsor, which will likely result in a governance style that tolerates higher financial risk in order to quickly expand the organization and equity base. MAG has made several acquisitions since 2017, and Moody's anticipates that M&A activity in the future may raise rather than lower the company's indebtedness. The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's believes that MAG faces operating risk stemming primarily from the potential for work stoppages or added operating costs associated with the outbreak. The stable ratings outlook is supported by the good backlog level, a favorable US defense budgetary setting, an adequate liquidity profile, and the likelihood that free cash flow will exceed scheduled term loan amortization requirements, leaving some cash for discretionary purposes such as prepayments of debt prepayment and/or other investments. The B3 rating assigned to the first lien credit facility reflects its preponderance within the company's debt capitalization, with a relatively modest layer of senior unsecured non-debt claims that would exist in a stress scenario, and thereby absorb first losses and benefit recoveries for secured creditors. The credit facility is expected to contain covenant flexibility for transactions that could adversely affect creditors. Factors that would lead to an upgrade or downgrade of the ratings: Upward rating momentum would depend on evidence that the company's rapid evolution is resulting in a more resilient and steady performing business. High single-digit percentage organic revenue growth, leverage sustained at 5x with free cash flow-to-debt in the high single-digit percentage range would be favorable for the ratings. Downward ratings pressure would build with leverage above the mid-7x level, a lack of free cash flow generation, or a weakening liquidity profile. The following ratings were assigned: Assignments: Issuer: MAG DS Corp Corporate Family Rating, Assigned B3 Probability of Default Rating, Assigned B3-PD Senior Secured Bank Credit Facilities, Assigned B3 (LGD3) Outlook Actions: Issuer: MAG DS Corp Outlook, Assigned Stable MAG DS Corp, a subsidiary of MAG Aerospace with headquarters in Fairfax, Virginia, is a provider of manned and unmanned aerial intelligence, surveillance, and reconnaissance services to the US Government, friendly foreign governments, intergovernmental organizations and commercial customers. MAG is majority-owned by entities of financial sponsor New Mountain Capital. MARTIN CONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Martin Construction, Inc. 110 West Louisville Avenue Atmore, AL 36502 Business Description: Martin Construction, Inc. is a construction company in Atmore, Alabama. Chapter 11 Petition Date: April 1, 2020 Court: United States Bankruptcy Court Southern District of Alabama Case No.: 20-11020 Judge: Hon. Jerry C. Oldshue Debtor's Counsel: Michael A. Fritz, Sr., Esq. FRITZ LAW FIRM 25 South Court Street, Suite 200 Montgomery, AL 36104 Tel: (334) 230-9790 Email: bankruptcy@fritzlawalabama.com Total Assets: $372,937 Total Liabilities: $1,018,996 The petition was signed by Phillip Martin, authorized representative. A copy of the petition containing, among other items, a list of the Debtor's 20 largest unsecured creditors is available for free at PacerMonitor.com at: https://is.gd/v9T4a3 MEDIQUIRE INC: Lasurkar Buying MediQuire India Shares for $43K -------------------------------------------------------------- Mediquire, Inc., asks the U.S. Bankruptcy Court for the Southern District of New York to authorize the sale of its shares of MediQuire India Private Ltd. to Sandeep Govindaraj Lasurkar for the aggregate purchase price of $43,258. The Debtor is winding down its operations and closing its business because it cannot function as a standalone business with its current customer base and product line. The revenue became insufficient to cover current operating expenses, and clients have been terminating and moving to in-house and/or more advanced data management alternatives. As such, management and the board of directors saw a limited opportunity for revenue growth or profitability. The Debtor was unsuccessful in obtaining additional capital to fund the monthly operating loss, and current investors chose not to invest additional capital in the business. The Debtor was also unsuccessful in selling the business, given the low level of annual revenue and continued losses. As part of the cessation of its operations, on Jan. 30, 2020, the Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code with the Court. One of the Debtor’'s assets is its 99.99% ownership interest (9,999 equity shares of Rs. 10 each fully paid up) in MediQuire India, a company registered in Pune, India having CIN U72900PN2017FTC172814 and registered office at D-1202 Palladio Housing Society, Tathawade Pune 411033. MediQuire India is in the business of software product development, software development services, research and development activities in the field of healthcare technology, creation of performance management platforms that leverage data (clinical, claims, demographic and others) to derive powerful insights about operational and clinical performance and gaps of individual care and provide the tools to clinicians and patients in order to close those care gaps, support to healthcare organizations for empowering them to meet their ultimate goals of healthier patients, manage risk and realize opportunities for revenue generation and to improve operational efficiency. As part of the termination of its business, the Debtor negotiated an agreement with Lasurkar for his purchase of the Debtor's shares in MediQuire India. The negotiations culminated in the execution of the Share Purchase Agreement. By the Motion, the Debtor asks approval of Share Purchase Agreement. The Share Purchase Agreement provides for the Debtor's sale of its 99.99% ownership interest in MediQuire India to Lasurkar. The consideration for Lasurkar's purchase the Debtor's shares in MediQuire India is $279.61 and Lasurkar's assumption of any and all claims asserted against the Debtor by the individuals listed on Schedule A to the Share Purchase Agreement, which the Debtor calculates as aggregating $43,258. The Court and interested parties are respectfully referred to the Share Purchase Agreement for a full recitation of the terms and conditions of the transaction. The Debtor submits that under the present circumstances a private sale is appropriate. The offer from Lasurkar is the highest and best offer that materialized during the time. The Debtor respectfully submits that testing the fairness and value of the offer in an auction process will be of no benefit. There simply have not been, nor does the Debtor anticipate, any other comparable offers. The Debtor asks approval to sell its Assets as a going concern, free and clear of any and all liens, claims or encumbrances. The Debtor is unaware of any secured claims except for the secured claims of FCA VI Holdings, LLC and Volcano Capital LLC. The undersigned believes that FCA VI Holdings, LLC and Volcano Capital LLC consent to the sale. Consequently, the Debtor proposes that any liens, claims or encumbrances asserted against its shares of Mediquire India sold pursuant to the Share Purchase Agreement be transferred to and attach to the proceeds of the sale, subject to the rights, claims, defenses, and objections, if any, of all interested parties with respect thereto. A copy of the Agreement is available at https://tinyurl.com/vdgf487 from PacerMonitor.com free of charge. About Mediquire Inc. Mediquire, Inc. -- https://mediquire.com/ -- is a data analytics company dedicated to accelerating the adoption of value-based payment methodologies. Its mission is to accelerate the transition to value-based care using a suite of advanced analytics solutions that help payers and providers design, negotiate, and track value-based contracts, as well as provide insights to aid providers in closing gaps at the point-of-care. Mediquire, Inc., based in New York, NY, filed a Chapter 11 petition (Bankr. S.D.N.Y. Case No. 20-10284) on Jan. 30, 2020. In the petition signed by CFO Rhonda Rosen, the Debtor disclosed $2,178,510 in assets and $1,780,713 in liabilities. Joel Shafferman, Esq., at Shafferman & Feldman LLP, serves as bankruptcy counsel. NCL CORP: Moody's Lowers CFR to Ba2, Outlook Negative ----------------------------------------------------- Moody's Investors Service downgraded the ratings of NCL Corporation Ltd. including its Corporate Family Rating to Ba2 from Ba1, its Probability of Default Rating to Ba2-PD from Ba1-PD, its senior secured bank facility rating to Ba2 from Ba1, senior unsecured rating to B1 from Ba2, and Speculative Grade Liquidity Rating to SGL-3 from SGL-1. The outlook is negative. This concludes the review for downgrade that was initiated on March 11, 2020. "The downgrade reflects the unprecedented impact the global spread the coronavirus (COVID-19) is having on the cruise industry, including the suspension of all sailing operations for NCL's brands through May 10," stated Pete Trombetta, Moody's lodging and cruise analyst. "Its base case assumption is that cruise operations in the US are suspended through June 30, resulting in highly negative free cash flow, and that there will be a slow recovery when sailings resume. While Moody's expects that earnings will improve in 2021, Moody's anticipates that bookings will be weak relative to 2019, which will result in NCL's debt/EBITDA approximating 5.5x as of year-end 2021," added Trombetta. NCL announced that its brands would extend the suspension of operations through May 10. Its base case assumption is that the cruise operations in the US are suspended through June 30, earnings improve in 2021 but bookings are still soft relative to 2019, which will result in NCL's debt/EBITDA approximating 5.5x at the end of 2021," added Trombetta. On March 13 NCL announced that it suspended global operations until April 11 and recently extended the suspension until May 10 because of the spread of COVID-19. Because of increased travel restrictions, and the number of cities that are limiting group gatherings in public places, Moody's anticipates the cruise industry will have to extend the suspension through the end of June. Downgrades: Issuer: NCL Corporation Ltd. Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-1 Corporate Family Rating, Downgraded to Ba2 from Ba1 Senior Secured Bank Credit Facility, Downgraded to Ba2 (LGD3) from Ba1 (LGD3) Senior Unsecured Regular Bond/Debenture, Downgraded to B1 (LGD6) from Ba2 (LGD6) Outlook Actions: Issuer: NCL Corporation Ltd. Outlook, Changed To Negative From Rating Under Review RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The cruise sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in NCL's credit profile, including its exposure to increased travel restrictions for US citizens have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on NCL from the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. NCL's credit profile is supported by its market position as the third largest ocean cruise operator worldwide, as well as its well-known brand names -- Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises, as well as the strong performance of its new ships in terms of pricing and bookings relative to its other ships which enables the company to compete against larger rivals across all its price points. Moody's believes that once the spread of COVID-19 is under control, and the public is more comfortable with cruising again, the cruise industry will once again benefit from favorable macroeconomic and demographic trends it has seen over the past 10 years. The value proposition of a cruise vacation will support the continued penetration of the vacation market by cruise operators which will help drive NCL's future earnings growth. While industry wide capacity will increase, over the long run, capacity expansion will remain at a manageable level as a result of inherent supply constraints driven by the number of ship yards that build the large ocean vessels. In the short run, NCL's credit profile will be dominated by the length of time that cruise operations continue to be highly disrupted and the resulting impacts on the company's cash consumption and its liquidity profile. The normal ongoing credit risks include its high leverage, which Moody's forecasts will approximate 5.5x at the end of 2021, the highly seasonal and capital intensive nature of cruise companies and the cruise industry's exposure to economic and industry cycles, weather incidents and geopolitical events. The negative outlook reflects Moody's expectation that any further increase in travel restrictions or change in public sentiment about cruising in general will cause earnings deterioration beyond its base assumption which could lead to liquidity concerns for NCL. Moody's views the company's liquidity as adequate reflected in part by its good cash balance of about $1.6 billion, which includes the drawdown of the company's $875 million and $675 million revolving credit facilities. This liquidity is sufficient to cover expected cash needs over the balance of the year, but the cushion will be modest given any further deterioration in earnings. NCL has adequate liquidity represented by good cash balances of $1.6 billion. This includes about $1.55 billion the company drew down on its two revolving credit facilities, leaving no additional revolver availability. The company's revolver contains one covenant that is not tested unless total liquidity drops to below $100 million. Moody's does not expect the covenant will be tested. Most of NCL's assets are encumbered either to ship level debt or the revolving credit facilities and term loans. Also considered is that while Moody's views cruise ships as valuable long-term assets, it does not believe the company could sell ships quickly to raise cash, if necessary. Factors that would lead to an upgrade or downgrade of the ratings: Factors that could lead to a downgrade include operations being suspended for longer than its base case assumption or updated expectations for a weaker recovery, that results in debt/EBITDA remaining above 4.0x or EBITA/interest is below 4.5x over the next two years. Any deterioration in liquidity could also cause negative rating pressure. A stable outlook would be considered if it becomes apparent that the current travel restrictions do not have an impact on 2021 demand trends. Although unlikely in the short term, positive rating action could come if debt/EBITDA and EBITA/interest expense improved to below 3.75x and above 4.5x, respectively. NCL Corporation Ltd., headquartered in Miami, FL, is a wholly owned subsidiary of Norwegian Cruise Line Holdings, Ltd. Norwegian operates 28 cruise ships with approximately 59,150 berths under three brand names; Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises. Net revenues were about $5.0 billion for the fiscal year ended December 31, 2019. NEENAH ENTERPRISES: S&P Cuts ICR to CCC+; Ratings on Watch Negative ------------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Neenah Enterprises Inc. to 'CCC+' from 'B'. S&P is also lowering its issue-level rating on subsidiary Neenah Foundry Co.'s term loan by two notches, to 'B-' from 'B+', in line with the downgrade of the company. S&P's '2' recovery rating is unchanged. The CreditWatch placement reflects the 1-in-2 chance that S&P will lower its ratings on Neenah during the next 90 days if it expects the company to face a liquidity stress or breach its financial maintenance covenant over the upcoming four quarters. "We could lower our ratings on Neenah over the next 90 days if we believe the company will face a near-term liquidity crisis. We could also lower our ratings if we believe a breach of the company's leverage covenant is likely and it will be unable to obtain timely covenant relief through an amendment or waiver. We expect Neenah will have very limited or no cushion under its leverage covenant in the third and fourth quarter of 2020 and could breach the leverage covenant unless the covenant level is amended," S&P said. "We could remove our ratings on Neenah from CreditWatch and/or raise our rating if we expect the company to maintain covenant headroom of more than 15% over the next 12 months. This could happen if the company obtains covenant relief through an amendment to its existing credit agreement, a refinancing, or if end markets materially rebound to normalized levels of activity. For a higher rating, we would also need to expect the company can comfortably cover its liquidity needs over the next 12 months," the rating agency said. NEW WAY INVESTMENTS: U.S. Trustee Objects to Plan & Disclosure -------------------------------------------------------------- David W. Asbach, Acting United States Trustee for Region 5 (UST), objects to final approval of the Disclosure Statement and Chapter 11 Plan of Reorganization of debtor New Way Investments, LLC and in support thereof represents as follows: * Pursuant to the monthly operating reports, while in the chapter 11, the Debtor made no income and made no disbursements. Currently, the Debtor is delinquent in filing the monthly operating report for February 2020. * The only monthly payment offered to be made under the Plan is a monthly payment of an unknown amount to Louisiana Department of Revenue for 50 months following confirmation. * The secured creditors will not receive any monthly payments. Instead, the Debtor seeks the Court’s authority to continue marketing the properties for another 6 months following confirmation and paying the secured creditors after a hypothetical sale of their collateral. It remains unclear as to how or when unsecured creditors and equity holders will be paid following confirmation. * Unless the Debtor actually files the 2018 state and federal tax returns its tax liability cannot conclusively be determined. Despite numerous promises that the Debtor will file the 2018 federal and state income tax returns and forward them to the UST, to date, the Debtor did not do so. * Regarding the payment to secured creditors, the Debtor asserts that upon the sale of several properties, the Debtor believes it will raise sufficient funds to pay them. However, the Debtor did not provide any property valuations or even an estimate as to how much it could raise by selling the properties. * The Debtor specifically admits that he has no reliable cash flow and no earning power whatsoever to even raise the funds to pay the quarterly fees. Despite this obstacle, the Debtor proposes to make monthly payments to the Louisiana Department of Revenue in an unknown amount for 50 months. A full-text copy of U.S. Trustee's objection to disclosure and plan dated March 19, 2020, is available at https://tinyurl.com/sbjbdhr from PacerMonitor at no charge. About New Way Investments New Way Investments LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. La. Case No. 19-80785) on Aug. 20, 2019. At the time of the filing, the Debtor was estimated to have assets of less than $50,000 and liabilities of less than $50,000. The case is assigned to Judge Stephen D. Wheelis. Thomas R. Willson, Esq., is the Debtor's legal counsel. NOVA CHEMICALS: Moody's Cuts CFR to Ba2 & Sr. Unsec. Rating to Ba3 ------------------------------------------------------------------ Moody's Investors Service downgraded NOVA Chemicals Corporation's corporate family rating to Ba2 from Ba1, probability of default rating to Ba2-PD from Ba1-PD and senior unsecured notes rating to Ba3 from Ba2. The rating outlook remains stable. "The downgrade reflects the high leverage coming into a cyclical downturn in the ethylene and polyethylene chain that could last through 2021," said Paresh Chari Moody's analyst. "NOVA's balance sheet has increased significantly since 2017 due to the Geismar acquisition and from the litigation payment to The Dow Chemical Company (Dow), leaving it more vulnerable to cyclical downturns." Downgrades: Issuer: NOVA Chemicals Corporation Corporate Family Rating, Downgraded to Ba2 from Ba1 Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 (LGD5) from Ba2 (LGD4) Outlook Actions: Issuer: NOVA Chemicals Corporation Outlook, Remains Stable RATINGS RATIONALE NOVA's Ba2 CFR reflects its 1) size and scale in the ethylene and polyethylene business; 2) manufacturing assets in North America that use cost-advantaged North American natural gas; and 3) flexible dividend policy that has at times preserved cash. The rating is constrained by NOVA's 1) limited product and geographic diversity; 2) expected leverage of around 5x debt to EBITDA through 2021; 3) Sarnia expansion projects that have execution risk which could lead to costs overruns and delays; and 4) a potential additional litigation payment to Dow that could increase leverage. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the limited impact on NOVA's credit quality of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered, and high-level lingering uncertainty. NOVA has good liquidity. At December 31, 2019 and pro forma for the sale to Borealis for $588 million expected in Q2 2020 and draw down under the revolver, NOVA will have about $1.8 billion in cash and no remaining availability under its $1.5 billion secured revolving credit facility due 2024. Moody's expects negative $250 million in free cash flow through 2020 if the company pays its $250 million dividend. Moody's expects NOVA to remain in compliance with its two financial covenants during this period. NOVA also has access to two accounts receivable facilities: The $125 million U.S. program, which expires in 2023; and the $50 million Canadian program, which expires in 2022. At December 31, 2019 $97 million was drawn against these facilities. The nearest debt maturity is $500 million of senior unsecured notes due 2023. NOVA senior unsecured debt is rated Ba3, one notch below the Ba2 CFR, reflecting its subordination to the $1.5 billion secured revolving credit facility, $500 million term loan and accounts receivable facilities. The stable outlook reflects its expectation that leverage will remain at a level that is adequate for the rating in a trough environment. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be upgraded if NOVA can keep debt to EBITDA below 3.5x, while successfully executing on its growth projects. The ratings could be downgraded if debt to EBITDA is likely to be sustained above 5.5x, or if there is sustained negative free cash flow that weakens liquidity. NOVA Chemicals Corporation (NOVA) is a privately-owned Calgary, Alberta-headquartered producer of ethylene, polyethylene plastics, and expandable polystyrene. OASIS PETROLEUM: S&P Downgrades ICR to 'CCC+'; Outlook Negative --------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Oasis Petroleum Inc. to 'CCC+' from 'B+'. At the same time, S&P is lowering its issue-level rating on the company's senior unsecured notes to 'CCC+' from 'B+'. The '3' recovery rating indicates S&P's expectation for meaningful (50%-70%; rounded estimate: 55%) recovery of principal in the event of a payment default. The collapse in oil prices will materially hurt Oasis Petroleum's cash flow and leverage metrics. S&P now projects the company's FFO to debt will average about 15% over the next two years, with debt to EBITDA of about 4.7x, affected by the sharp reduction in its oil price assumptions. About 70% of Oasis' production is oil, making its profitability very sensitive to moves in oil prices. Oasis has a strong hedge book in place for 2020, with 73% of its projected 2020 oil production hedged at an average price of about $48.50 per barrel (bbl) but is mostly unhedged in 2021, leaving it susceptible to price risk given the uncertain outlook. S&P Global Ratings recently revised its price assumption for West Texas Intermediate (WTI) crude oil to $25/bbl in the remainder of 2020 and $45/bbl in 2021. The negative outlook reflects the risk that liquidity could deteriorate to a level S&P would consider to be less than adequate given the company's significant upcoming debt maturities--in particular, its $891 million in senior unsecured notes maturing in March 2022--as well as the risk that the company's RBL size could be reduced at its next bank redetermination given the recent collapse in crude oil prices. In addition, given the weak capital market conditions and currently poor trading levels of the company's debt, S&P believes there is an increased likelihood the company could engage in a transaction it would view as distressed. The rating agency expects FFO to debt in the range of 15%-20% over the next 12-24 months. "We could lower the rating if we expected that unsupportive capital markets would limit the company's options to proactively refinance its upcoming debt maturities and we believed it would pursue a refinancing transaction that we could view as distressed. In addition, we could lower the rating if the company's liquidity deteriorated significantly, which would most likely occur from a material reduction to its RBL size or from lower-than-expected crude oil prices," S&P said. "We could revise the outlook to stable if the company successfully addresses its 2022 debt maturity in a manner we do not consider to be distressed while maintaining adequate liquidity and a FFO to debt of well above 12%. This would likely require an improvement in capital markets and crude oil prices higher than our current assumption of $25/bbl for the remainder of 2020," the rating agency said. PASHA GROUP: Moody's Places B3 CFR on Review for Downgrade ---------------------------------------------------------- Moody's Investors Service placed all of its ratings for The Pasha Group on review for downgrade, including the B3 Corporate Family Rating, the B3-PD Probability of Default Rating and B2 rating on the senior secured bank credit facility. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The company is exposed to sectors that will be significantly affected by the shock, given their sensitivity to consumer demand and sentiment, general economic and industrial activity. More specifically, Pasha's credit profile, including its exposure to the automotive cycle, the transportation sector and its reliance on Hawaii's economy, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Pasha remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the expected impact on Pasha of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. In its review, Moody's will consider: (i) the company's liquidity position; (ii) evolving market conditions, including the magnitude of the impact of the coronavirus outbreak on cargo volumes and demand for the company's services (iii) the company's ability to adapt its costs and investments to potentially rapid or prolonged declines in demand or pricing conditions, and (iv) the potential to restore credit metrics when economic activity recovers. Pasha's ratings, including the B3 CFR, consider its long term contracts to operate select marine port terminals on the US west coast and in Hawaii, and its longstanding relationships with blue chip customers. However, the company is exposed to the general economic cycle and strongly correlated to the Hawaiian economy, which itself is quite exposed to tourism. Further, there is meaningful competition on Pasha's markets, including its core Hawaii-US West Coast trade lane. The company also has key man risk and relatively high fixed costs due in part to an old Jones Act fleet that makes free cash flow susceptible to mechanical disruptions. The expected delivery of two LNG-powered replacement newbuilds over the next year should improve fuel efficiency and lower maintenance costs. Moody's took the following actions on Pasha Group (The): Corporate Family Rating, Placed on Review for Downgrade, currently B3 Probability of Default Rating, Placed on Review for Downgrade, currently B3-PD Senior Secured Bank Credit Facility, Placed on Review for Downgrade, currently B2 (LGD3) Outlook, Changed to Ratings Under Review from Stable The Pasha Group, based in San Rafael, California, is a provider of transportation and logistics services, including ocean-based shipping, automotive port processing and distribution, and relocation services. The company is privately-held, primarily by the Pasha family. Revenues approximated $949 million for the last twelve months ended September 30, 2019. PATRICK INDUSTRIES: S&P Places 'BB-' ICR on CreditWatch Negative ---------------------------------------------------------------- S&P Global Ratings placed all ratings on Patrick Industries Inc., including the 'BB-' issuer credit rating, on CreditWatch with negative implications. The CreditWatch listings reflect a significant anticipated decline in revenue and cash flow due to production suspensions at Patrick and several of its large customers. In addition, S&P believes there is a high level of uncertainty in Patrick's four customer end markets over the next several months as the U.S. grapples with the containment of COVID-19, and the impact that an anticipated U.S. and European recession would have on revenue through 2021. Patrick is currently suspending operations at certain plants for up to two weeks depending on government requirements and the needs of the company's specific end markets, some of which may be deemed essential. A number of Patrick's key original equipment manufacturer customers have also announced partial or substantial temporary factory suspensions in response to COVID-19, including Thor, Winnebago, Skyline Champion, and Brunswick. S&P has assumed the production suspensions could last longer than the currently announced suspension plans given the rating agency's current base case for virus containment later in the second quarter. S&P believes these factory suspensions could substantially affect Patrick's revenue at least in second-quarter 2020. In addition, S&P's economists anticipate a recession to cause a severe GDP and consumer spending decline in the second quarter, likely affecting all of Patrick's end markets to varying degrees. S&P believes there will probably be a more immediate impact on big-ticket discretionary purchases such as RVs and leisure boats, followed by an impact on the manufactured housing and industrial end markets, which typically experience a lagged impact because suppliers such as Patrick trail real estate developers by some months in terms of order patterns. The CreditWatch placements reflect significant anticipated stress on revenue and cash flow over at least the next several weeks, and possibly months, which could use liquidity, materially reduce EBITDA this year even in a recovery scenario, and result in a spike in leverage. "We could lower the ratings over the next few months, or sooner, if we no longer believe COVID-19 containment could occur by about the end of second-quarter 2020 so that consumer demand in Patrick's end markets could begin to recover. Because there is currently a high degree of uncertainty in our updated assumptions, we could also lower the rating if we do not expect Patrick to recover following a significant spike in leverage in 2020 and reduce our measure of leverage in 2021 to under our 4x downgrade threshold," S&P said. PATTERSON-UTI ENERGY: S&P Downgrades ICR to BB+; Outlook Negative ----------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on Patterson-UTI Energy Inc. (PTEN) and its ratings on the company's unsecured debt to 'BB+' from 'BBB'. S&P assigned a '3' recovery rating to PTEN's senior unsecured notes. "We expect rig utilization and to a lesser extent, day rates, will be considerably lower than what we had previously estimated. Thus far, exploration and production (E&P) companies have cut their capital expenditure (capex) budgets by an average of at least 30%, which we anticipate will result in the release of spot rigs early in 2020 and contracted rigs in late 2020 and early 2021. Moreover, smaller and less-creditworthy E&P companies could face bankruptcy without a healthy financing environment to emerge from Chapter 11 bankruptcy," S&P said. The negative outlook reflects S&P's lowered West Texas Intermediate (WTI) assumptions, resulting in significantly weaker market conditions in pressure pumping and anticipated weak demand for drilling rigs. The rating agency forecasts FFO to debt could temporarily weaken below 20% in 2021. "We could lower rating if were expect FFO to debt to remain below 20% for a sustained period. This would likely occur if capex budgets are further cut or E&P companies cannot emerge successfully from Chapter 11 bankruptcy, likely as a result of oil prices staying low into 2021," S&P said. "We could revise our outlook back to stable if oil prices rise, resulting in increased demand for pressure pumping and improved rig utilization and day rates. Alternatively, we could revise the outlook to stable if PTEN's credit ratios improve such that FFO to debt remains above 40% and debt to EBITDA declines and stays below 2x on a sustained basis," the rating agency said. PINNACLE REGIONAL: U.S. Trustee Appoints Creditors' Committee ------------------------------------------------------------- The Office of the U.S. Trustee on March 31 appointed a committee to represent unsecured creditors in the Chapter 11 cases of Pinnacle Regional Hospital, Inc. and its affiliates, Pinnacle Regional Hospital LLC, Pinnacle Healthcare System Inc., Blue Valley Surgical Associates, Rojana Realty Investments Inc. and Joys' Majestic Paradise, Inc. The committee members are: (1) Janine Karwacki Boston Scientific Corp. 300 Boston Scientific Way Marlborough, MA 01752 508-382-0252 (phone) Janine.Karwacki@bsci.com c/o Steven D. Sass Steven D. Sass, LLC P.O. Box 45 Clarksville, MD 21029 410-458-6100 (phone) 410-630-7233 (fax) stevendsassllc@gmail.com (2) Wayne Malcolm Centinel Spine, LLC 505 Park Ave., 14th Floor 212-583-9700, ext. 2187 (phone) 212-826-9509 (fax) w.malcolm@centinelspine.com (3) Joe Esparraguerra Collect Rx, LLC 6720-B Rockledge Dr., #600 Bethesda, MD 20817 301-230-2440 (phone) jesparraguerra@collectrx.com (4) Lisa Everson FarMor Media 23901 S. State Rte. E P.O. Box 403 Harrisonville, MO 64701 816-719-3780 (fax) lisa@farmormedia.com (5) Mindi Otto Favorite Healthcare Staffing 7255 W. 98th Terrace, Bldg. 5, Suite 150 Overland Park, KS 66212 913-800-7071 (phone) motto@favoritestaffing.com (6) Brian Lueger In2itive, LLC 6330 Sprint Parkway, Suite 425 Overland Park, KS 66211 913-948-6383 (phone) 913-262-3509 (fax) blueger@kvci.com (7) Scott Smith Medline Industries, Inc. Three Lakes Drive Northfiled, IL 60093 847-643-4232 (phone) scsmith@medline.com Official creditors' committees serve as fiduciaries to the general population of creditors they represent. They may investigate the debtor's business and financial affairs. Committees have the right to employ legal counsel, accountants and financial advisors at a debtor's expense. About Pinnacle Regional Hospital Pinnacle Regional Hospital, Inc. is an operator of general acute-care hospitals in Overland Park, Kansas. See http://pinnacleregional.com/ Pinnacle Regional Hospital and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Kansas Lead Case No. 20-20219) on Feb. 12, 2020. The affiliates are Pinnacle Regional Hospital LLC, Pinnacle Healthcare System Inc., Blue Valley Surgical Associates, Rojana Realty Investments Inc. and Joys' Majestic Paradise, Inc. At the time of the filing, Pinnacle Regional Hospital disclosed assets of between $10 million and $50 million and liabilities of the same range. McDowell, Rice, Smith & Buchanan, PC is the Debtors' legal counsel. POLYMER ADDITIVES: Moody's Cuts CFR to Caa2; Alters Outlook to Neg. ------------------------------------------------------------------- Moody's Investors Service has downgraded Polymer Additives, Inc.'s (d/b/a Valtris Specialty Chemicals) Corporate Family Rating to Caa2 from B3, as well as the company's senior secured first lien revolver and term loan to Caa2 from B3. The outlook has been changed to negative from stable. Assignments: Issuer: Polymer Additives, Inc. Corporate Family Rating, Downgraded to Caa2 from B3; Probability of Default Rating, Downgraded to Caa2-PD from B3-PD; Senior Secured First Lien Revolving Credit Facility, Downgraded to Caa2 (LGD4) from B3 (LGD3) Senior Secured First Lien Term Loan, Downgraded to Caa2 (LGD4) from B3 (LGD3) Outlook Actions: Outlook, Changed to Negative from Stable. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Polymer additives such as plasticizers, stabilizers and lubricants are affected by the shock given their sensitivity to industrial and construction activities. More specifically, the weaknesses in Valtris' credit profile, including its high leverage and exposure to transportation and construction sectors, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Valtris of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Weakening earnings, increasing debt leverage and narrowing headroom under its springing financial covenant weigh on Valtris' credit profile. Based on Moody's estimates and including analytical adjustments, the company's debt to EBITDA ratio will well exceed eight times and interest coverage will be just above one time. Moody's expects outlays for business restructuring and other operating expenses will lead to negative free cash flow and additional debt funding in 2020. Its credit quality is much weaker than its expectation at the initial rating assignment in 2018. Valtris has a broad range of polymer additives, including plasticizers, stabilizers and lubricants based on a variety of raw materials including toluene, soybean oil and tallow. Demand for polymer additives is generally in line with GDP, given their primary application in PVC, as well as other polyolefin and rubber products, which in turn are driven by applications in building, transport, packaging, electric and healthcare. Recently, its earnings have been negatively affected by a general demand reduction in certain end markets, particularly transportation and building products, and increased competition in the benzyl alcohol market as a temporary shutdown in Asian manufacturing capacity was lifted. Moody's expects the company's EBITDA will decline in 2020 from the reported level of $62.8 million (prior to Moody's adjustments) for the last twelve months ending September 2019. Certain Valtris' products such as butyl benzyl phthalate plasticizers have also seen declining sales due to the impact of government regulation and product substitution in the last few years. Valtris' liquidity profile is constrained by the expected weak cash flow and the requirement to comply with its springing financial covenant. The company has recently drawn down the entire $60 million revolver out of precaution amid the challenging market environment. Hence, the company has a strong cash balance for daily operations over the next several quarters. However, this borrowing has triggered the revolver's springing first-lien net leverage covenant of not exceeding 7.85x when more than 35% (or $21 million) of the revolver is drawn. Moody's estimated that the company had about $10 million EBITDA headroom under the springing covenant and further deterioration in its reported EBITDA towards about $50 million would substantially increase the risk of breaching the covenant. Valtris' rating is supported by its leadership in niche applications such as bio-based plasticizers and environmentally friendly fast-fusing plasticizers, that will show stronger growth. Its business profile is also backed by a broad customer base, geographic diversification, and entrenched customer relations. The acquisition of INEOS' businesses, including esters, chlorotoluenes and derivatives, in 2018 expanded the company's revenues base and its product offerings with environmentally friendly esters plasticizers and offer growth opportunities in benzyl alcohol and derivatives. Factors that would lead to an upgrade or downgrade of the ratings The negative outlook reflects the expected earnings weakness and weak liquidity. Moody's would consider upgrading the ratings if the company improves its debt leverage sustainably below 7.5x and improves its liquidity profile. Conversely, the ratings could be lowered if earnings or liquidity continue to deteriorate. The principal methodology used in these ratings was Chemical Industry published in March 2019. Polymer Additives, Inc., d/b/a Valtris Specialty Chemicals, is a manufacturer of a diverse set of polymer modifiers, lubricants, and stabilizers primarily used as additives in the production of plastics. In 2018, Valtris acquired certain businesses from Ineos Group Holdings S.A. (Ba2 stable). The combined businesses generate about $700 million in sales per annum. PRECISION DRILLING: Moody's Cuts CFR to B2, Alters Outlook to Neg. ------------------------------------------------------------------ Moody's Investors Service downgraded Precision Drilling Corporation's Corporate Family Rating to B2 from B1, Probability of Default Rating to B2-PD from B1-PD, senior unsecured rating to B3 from B2 and Speculative Grade Liquidity Rating to SGL-2 from SGL-1. The outlook was changed to negative from stable. "The rating downgrade reflects its expectation that the dramatic reduction in capital spending from oil and gas producers will lead to a decline in Precision's EBITDA and an increase in leverage" commented Moody's Analyst Jonathan Reid. Downgrades: Issuer: Precision Drilling Corporation Corporate Family Rating, Downgraded to B2 from B1 Probability of Default Rating, Downgraded to B2-PD from B1-PD Speculative Grade Liquidity Rating, Downgraded to SGL-2 from SGL-1 Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD4) from B2 (LGD4) Outlook Actions: Issuer: Precision Drilling Corporation Outlook, Changed To Negative From Stable RATINGS RATIONALE Precision benefits from: 1) good liquidity that is supported by positive free cash flow in 2020 which Moody's expects will be allocated to debt reduction; 2) broad North American diversification and presence in Middle East markets; and 3) its high quality rig fleet. Precision is challenged by: 1) declining EBITDA in 2020 driven by the dramatic reduction in capital spending from oil and gas producers; 2) the low number of rigs under contract in 2020; and 3) high exposure to the weak Canadian market. Precision's liquidity is good (SGL-2). Precision's cash at December 31, 2019 was roughly C$75 million and the US$500 million secured revolving credit facility due November 2023 was undrawn. Moody's expects Precision to generate positive free cash flow in 2020 that the company will dedicate towards reducing debt. The reduction in EBITDA Moody's expects in 2020 could lead to Precision breaching its financial covenants towards the end of 2020, particularly if drilling activity falls more than it currently expects. Alternative sources of liquidity are limited principally to the sale of Precision's existing drilling rigs and completion and well service rigs, which are largely encumbered. Precision's senior unsecured notes are rated B3, one notch below the B2 CFR, reflecting the priority ranking of the US$500 million revolving credit facility in the capital structure. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The OFS sector has been one of the sectors most significantly affected by the shock given its sensitivity to demand and oil prices. More specifically, the weaknesses in Precision's credit profile have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Precision remains vulnerable to the outbreak continuing to spread and oil prices remaining weak. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Precision of the breadth and severity of the oil demand and supply shocks, and the broad deterioration in credit quality it has triggered. Governance factors that were considered in this rating were Precision's regular publishing of fiscal updates and forecasts and financial policies that balance shareholder and debtholder priorities as the company has no regular dividend, and balances the use of free cash flow to reduce debt and repurchase equity. The negative outlook reflects the potential that oil and gas producers could cut capital spending greater than currently anticipated, leading to further downward pressure on Precision's operating profile and potentially leading to breached financial covenants towards the end of 2020. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if Debt/EBITDA is sustained above 6x and, EBITDA/Interest is sustained below 2x, or if the company generated sequential negative free cash flow. The ratings could be upgraded if Debt/EBITDA is sustained below 5x and EBITDA/Interest is sustained above 3x in an improving industry environment while maintaining good liquidity and low refinancing risk. The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. Precision is a Calgary, Alberta-based onshore driller that also provides well completion and production services to exploration and production companies in major hydrocarbon basins across North America and the Middle East. RADIAN GROUP: S&P Affirms 'BB+' Issuer Credit Rating; Outlook Neg. ------------------------------------------------------------------ S&P Global Ratings said it revised its outlook to negative from stable on four U.S. private mortgage insurers and their subsidiaries: Arch Capital Group Ltd.; Essent Guaranty Inc.; MGIC Investment Corp.; and Radian Group Inc. S&P Global Ratings revised its outlook to negative from positive on NMI Holdings Inc. At the same time, S&P has affirmed its issuer credit ratings (ICR) on each holding company and its subsidiaries, and financial strength ratings (FSR) on insurance operating subsidiaries: -- Arch Capital Group Ltd.: A-/Negative -- Essent Guaranty Inc.: BBB+/Negative FSR and ICR (the holding company is not rated) -- MGIC Investment Corp.: BB+/Negative -- NMI Holdings Inc.: BB/Negative -- Radian Group Inc.: BB+/Negative The ratings on Genworth Mortgage Insurance Corp. remain on CreditWatch with developing implications, where they were placed Sept. 26, 2018. The U.S. private mortgage insurers (PMIs) are facing the prospect of much higher losses as uncertainty abounds with the current state of the U.S. economy. S&P Global Ratings is projecting a sharp GDP contraction in the second quarter of 2020 of almost double the 6% from last week's estimate and a contraction in the first quarter as well, due to containment measures undertaken to stop the outbreak of COVID-19. There is a high degree of uncertainty about the size of the downside risk and the path of recovery will depend on the outbreak containment, the government's policy responses, and any resulting lasting damage to the economy. The focus on containment and lockdown of large swaths of the population is leading to a sudden slump in consumer spending, leading to a jump in unemployment, which could be higher than originally anticipated in S&P's economic projections. Higher mortgage payment delinquencies would naturally follow. PMIs would have to recognize these delinquencies through their earnings and loss reserves. Although, in considering the unique nature of the economic crisis, S&P does not know the level of delinquencies that may come through, the ultimate cure activity on these delinquencies, and the severity on the defaulted loans. In general, mortgage vintages reach peak loss in three to four years after origination, so the robust mortgage originations of recent years (2017-2019 constituted 63% of the total portfolio on average) are particularly at risk because first-time home buyers are usually a bigger proportion of a PMI's portfolio, and they usually have not built up their savings. Certain PMIs with lingering exposures from pre-2009 vintages would also be more exposed. S&P believes that, unlike in the 2008 Great Recession, this time the housing market is fairly valued and any possible negative impact on house prices due to curtailment of purchase originations activity may not be as material, at least in the near term. This would provide less of an incentive for the borrowers to walk away, partially offsetting S&P's view of these risks. The negative outlook reflects the impact economic and market uncertainty could have on the loss experience and risk-adjusted capitalization of the PMIs. S&P recognizes that there is a higher degree of uncertainty and a growing downside risk, which may lead to rating actions over the next two quarters. "We could lower our ratings on the PMIs during the next two quarters if the COVID-19 impact drives a significant increase in unemployment resulting in higher mortgage delinquencies. This could become a capital event, which could ultimately weaken the PMIs' risk-adjusted capitalization relative to our ratings expectations, exacerbated by the potential scarcity of reinsurance capacity, including ILN," S&P said. S&P could affirm the ratings and revise the outlooks back to stable if: -- Losses are largely contained within PMIs' earnings; -- Reinsurance structures and risk management perform as expected; and -- Risk-adjusted capitalization remains supportive of S&P's current ratings. ROBERT STANFORD: Montage Buying Talcott Life Policy for $262K ------------------------------------------------------------- Robert Fletcher Stanford, Sr. and Frances Sharples Stanford ask the U.S. Bankruptcy Court for the Northern District of Alabama to authorize the sale Talcott Universal Life Policy to Montage Financial Group or its assignee for $263,000. Well into the administration of their Chapter 11 bankruptcy case and the continued management of their business and financial affairs as DIP, Robert Fletcher Stanford, Sr., co-debtor, realized that certain Universal Life life insurance policies, one such policy to be made the subject of the Motion to Sell, were inadvertently omitted "assets to the Debtors' Schedule B-asset schedule. The life insurance policies in question and to be added to the Debtors Schedule B in Item 31, and to be claimed as exempt in Schedule C of the Debtors' schedules, are the following: a. Insurance Company: PacLife Life Insurance Policy No.: VF52483860 Death Benefit: $750,000 on the life of Robert Fletcher Stanford Beneficiary: Frances S. Stanford Cash Value: $549 as of the Chapter 11 Filing Date Value of Subject Policy: $549 as of the Chapter 11 Filing Date Policy Issuance Date: March 5, 2013 b. Insurance Company: PacLife Life Insurance Policy No.: VF52483870 Death Benefit: $750,000 on the life of Robert Fletcher Stanford Beneficiary: Frances S. Stanford Cash Value: $0 as of the Chapter 11 Filing Date Value of Subject Policy: $1 as of the Chapter 11 Filing Date Policy Issuance Date: March 15, 2013 c. Insurance Company: Hartford administered by Talcott Resolution Life and Annuity Insurance Co. Life Insurance Policy No.: IU3160922 Death Benefit: $5 million on the life of Robert Fletcher Stanford Beneficiary: Frances S. Stanford Cash Value: $0 as of the Chapter 11 Filing Date Value of Subject Policy: $1 as of the Chapter 11 Filing Date Policy Issuance Date: Oct. 4, 2012 Regarding the Talcott Universal Life Policy, as of the Chapter 11 Filing Date, May 3, 2019, the Talcott Universal Life Policy issued by Hartford Life had $0 accumulation value and $0 surrender value. The cash value accumulation disclosure as of today reports $0 and $0 surrender value. The policy in question has no living value for as long as the insured is alive and thus has no living value to inure to the Chapter 11 bankruptcy estate in its presently issued character. The Co-Debtor, Robert F. Stanford, Sr., has made no out-of-pocket premium payments on the Talcott Universal Life Policy since Nov. 15, 2018, as a matter of fiscal necessity; upon information and belief, such quarterly premium payments of $17,856 annualize at $71,424. The Talcott Universal Life Policy is scheduled for lapse on May 4, 2022, if no further premium payments are made. The Debtors cannot afford to make the premium payments. The policy is therefore at risk of lapse. Exhibit 1 is an annual report issued by Talcott Resolution Life and Annuity Insurance Co. bearing a report date of Oct. 5, 2019, providing, as of that date, information relating to policy number IU3160922. Such information has not changed. On Dec. 26, 2019, the Co-Debtor, entered into a (proposed) Life Settlement Contract with Montage Financial Group, subject to bankruptcy court approval, wherein Robert F. Stanford, Sr., as the owner the Talcott Universal Life Policy, indicated his desire for Montage Financial Group to ﬁnd a purchaser for the policy. Montage is in the business of facilitating purchase and sale of certain life insurance policies from owners such as the Co-Debtor to third parties. The negotiated consideration to be paid for the Co-Debtor's Talcott Universal Life Policy by the Purchaser is the sum of $263,000 in consideration for which the Co-Debtor will absolutely sell, transfer and deliver to the Buyer all right, title and interest in the policy, and the Debtors discharge all past, present, or future claims, rights or interests relating to ownership of the Talcott Universal Life Policy in exchange for the sum and payment of $263,000 to the Debtors. The Co-Debtor ceased making premium payments on the Talcott Universal Life Policy in 2018 and he is unable to resume payments. The policy is assigned a lapse date in the event of no further premiums being made of May 4, 2022. Upon information and belief, the Co-Debtor has not assigned, pledged or created liens in favor of any creditor or claimant in the Talcott Universal Life Policy. The sale will be free and clear of the interests of known and unknown claimants (although the Debtors are of the belief that the Talcott Universal Life Policy has not otherwise been assigned or pledged, or had liens created against it in favor of any creditor or claimant). From the proceeds of sale of the Talcott Universal Life Policy, the Debtors propose to pay approved administrative expenses of the estate such as their accrued and approved, but largely unpaid attorney's fees, as well as certain unpaid quarterly fees to the Bankruptcy Administrator, and to utilize a robust portion of any remainder in furtherance of their overall Chapter 11 reorganization efforts. A copy of the Exhibits is available at https://tinyurl.com/qqs2afj from PacerMonitor.com free of charge. Robert Fletcher Stanford, Sr. and Frances Sharples Stanford sought Chapter 11 protection (Bankr. N.D. Ala. Case No. 19-01846) on May 3, 2019. The Debtors tapped Frederick Mott Garfield, Esq., at Spain & Gillon, LLC as counsel. ROVIG MINERALS: Unsecureds to Get Net Litigation Trust Proceeds --------------------------------------------------------------- The Trustee for debtor Rovig Minerals, Inc., filed with the U.S. Bankruptcy Court for the Western District of Louisiana, Lafayette Division, a Joint Chapter 11 Plan and a Disclosure Statement on March 19, 2020. Rovig operated as a debtor in possession for a short period of time before Dwayne M. Murray was appointed as the chapter 11 trustee on Dec. 3, 2019, following a contested evidentiary hearing on Nov. 22, 2019. The hearing on the need for a trustee revealed the existence of unpaid prepetition royalties in excess of $1.2 million (actual amount now known to be $1.45 million), which further served as grounds for the appointment. After a brief period of educating himself on the history of the company and its current wherewithal to reorganize as a going concern, the Trustee made a decision, in his business judgment, to embark upon a competitive sale process on a dual track with confirmation. That decision was made easier by a group who approached the Trustee almost immediately after his appointment about making a cash offer as a potential stalking horse for an auction, Golden Hawk Investors LLC. Class 7 consists of General Unsecured Claims, including any deficiency claims of holders of claims in Classes 2 to 6, purported lien claims on properties not sold to the stalking horse or to the prevailing bidder at the Auction. Upon consummation of the confirmed plan, holders of allowed Class 7 claims will exchange their claims for status as a beneficiary of the Litigation Trust, entitled to a pro rata share of any Net Litigation Trust Proceeds distributed to beneficiaries. At this time, it is impossible to estimate how much will be paid to Class 7, as the result is entirely dependent upon litigation to be instituted by the litigation trust on certain avoidance actions against third parties. The owners of stock in Rovig Minerals and the membership interests in Rovig Minerals, LLC of MT are classified in Class 8. These interests will be terminated and will receive nothing under the Plan. The Trustee's oil and gas consultants have constructed an actual and online data room and have secured no less than 10 non-disclosure agreements with parties who have expressed interest in the auction assets and have followed through with active research. Through competitive bidding it is hoped that a higher purchase price will allow creditors in Class 5 and 7 to get paid more. The Trustee is confident that the open, transparent process will justify closing the transaction with Golden Hawk if an auction is not invoked. In the Trustee's business judgment, the restructured offer by Golden Hawk is a fair price for the Debtor's assets. Any alternative to this Plan must generate a greater return for creditors. A full-text copy of the Disclosure Statement dated March 19, 2020, is available at https://tinyurl.com/wv36u2m from PacerMonitor at no charge. About Rovig Minerals Rovig Minerals, Inc. -- http://www.rovigminerals.com/-- was founded in 1980 in Billings, Mont., to pursue exploration and development of mineral, oil and gas projects around the world. On Sept. 25, 2019, creditors FDF Energy Services LLC, Tri-City Services Inc., Oil Country Tubular Corp., DH Rock Bit Inc., Aldonsa Inc. filed an involuntary Chapter 11 petition against the Debtor (Bankr. W.D. La. Case No. 19-51133). The creditors are represented by Michael A. Crawford, Esq., at Taylor, Porter, Brooks & Phillips. On Oct. 18, 2019, the Debtor and the Petitioning Creditors signed a joint stipulation to convert the involuntary to a voluntary chapter 11 and for entry of a consent order for relief pursuant to 11 U.S.C. Sec. 303(h)(1). The case is assigned to Judge John W. Kolwe. The Debtor tapped H. Kent Aguillard, Esq., and Caleb Aguillard, Esq., as its bankruptcy attorneys. Rovig operated as a debtor in possession for a short period of time before Dwayne M. Murray was appointed as the chapter 11 trustee on Dec. 3, 2019. Counsel to the Trustee: Michael A. Crawford TAYLOR, PORTER, BROOKS & PHILLIPS, L.L.P. P.O. Box 2471, Baton Rouge, LA 70821-2471 450 Laurel Street, 8th Floor, Baton Rouge, LA 70801 Tel: (225) 387-3221 Fax: (225) 346-8049 SANUWAVE HEALTH: Incurs $10.4 Million Net Loss in 2019 ------------------------------------------------------ SANUWAVE Health, Inc., filed with the Securities and Exchange Commission its Annual Report on Form 10-K reporting a net loss of $10.43 million on $1.03 million of total revenues for the year ended Dec. 31, 2019, compared to a net loss of $11.63 million on $1.85 million of total revenues for the year ended Dec. 31, 2018. As of Dec. 31, 2019, the Company had $3.38 million in total assets, $13.44 million in total liabilities, and a total stockholders' deficit of $10.06 million. Marcum LLP, in New York, NY, the Company's auditor since 2018, issued a "going concern" qualification in its report dated March 30, 2020 citing that the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. A full-text copy of the Form 10-K is available for free at: https://is.gd/T6sUsP About SANUWAVE Health Inc. Headquartered in Suwanee, Georgia, SANUWAVE Health, Inc. (OTCQB:SNWV) (www.SANUWAVE.com) is a shockwave technology company initially focused on the development and commercialization of patented noninvasive, biological response activating devices for the repair and regeneration of skin, musculoskeletal tissue and vascular structures. SANUWAVE's portfolio of regenerative medicine products and product candidates activate biologic signaling and angiogenic responses, producing new vascularization and microcirculatory improvement, which helps restore the body's normal healing processes and regeneration. SANUWAVE applies its patented PACE technology in wound healing, orthopedic/spine, plastic/cosmetic and cardiac conditions. Its lead product candidate for the global wound care market, dermaPACE, is US FDA cleared for the treatment of Diabetic Foot Ulcers. The device is also CE Marked throughout Europe and has device license approval for the treatment of the skin and subcutaneous soft tissue in Canada, South Korea, Australia and New Zealand. SANUWAVE researches, designs, manufactures, markets and services its products worldwide, and believes it has demonstrated that its technology is safe and effective in stimulating healing in chronic conditions of the foot (plantar fasciitis) and the elbow (lateral epicondylitis) through its U.S. Class III PMA approved OssaTron device, as well as stimulating bone and chronic tendonitis regeneration in the musculoskeletal environment through the utilization of its OssaTron, Evotron and orthoPACE devices in Europe, Asia and Asia/Pacific. In addition, there are license/partnership opportunities for SANUWAVE's shockwave technology for non-medical uses, including energy, water, food and industrial markets. SCHAEFER AMBULANCE: Unsecured Claims Hiked to $4.1 Million ---------------------------------------------------------- Debtor Schaefer Ambulance Service, Inc., filed the Disclosure Statement describing the Second Amended Plan dated March 17, 2020. This is, essentially, a liquidating plan. In other words, the Plan Proponent seeks to accomplish payments under the Plan by assigning all of its assets to a trust that will collect and distribute the cash proceeds of those assets to creditors and interest holders as set forth in the trust document. The Effective Date of the proposed Plan is expected to be May 1, 2020. Class 4 General Unsecured Claims total $4.1 million. The prior iteration of the Plan estimated $2.4 million in General Unsecured Claims. On the Effective Date, holders of Allowed General Unsecured Claims will receive, on account of such Allowed Claims, a Beneficial Interest in and to the Assets of the Creditor Trust assigned to Class 4 under the terms of the Creditor Trust Agreement (the "Class 4 Beneficial Interest"). Beginning on the first Business Date of the first calendar month following the end of the calendar quarter in which the Allowed Non-Tax Priority Claims are paid in full, and continuing on the same date of the month following each calendar quarter thereafter, the Holders of Allowed Class 4 Claims will receive Pro Rata distributions from the available Cash in the Creditor Trust Estate, less such Cash as may be necessary to replenish the Creditor Trust Administration Reserve, as determined by the Trustee, until the earlier of (a) the date on which all such Allowed Class 4 Claims have been paid in full, and (b) the Assets in the Creditor Trust Estate have been fully administered. The Debtor projects that, after payment of the Administrative Claims and the Allowed Claims in Classes 1-3, there will be de minimus Cash available in the Creditor Trust for distributions to holders of Class 4 Claims. The Debtor has projected that it will have $706,131 in Cash On Hand on the Effective Date, which Cash is comprised of the remaining proceeds of the sales of the Debtor's real properties (other than the La Mesa Property) and the collection of accounts receivable. The Debtor's cash on hand will be used on the Effective Date to (a) fund the Administrative Claims Reserve ($150,000), (b) fund the Creditor Trust Reserve ($145,000), and (c) make pro rata distributions to holders of Allowed Priority Tax Claims and Class 1 Claims (collectively estimated at $851,000, before any objections). The hearing where the Court will determine whether to approve this Disclosure Statement as containing adequate information and whether to confirm the Plan will take place on April 21, 2020, at 1:00 p.m., in Courtroom 1545, U.S. Bankruptcy Court, Edward R. Roybal Federal Building and Courthouse, 255 E. Temple Street, Los Angeles, CA 90012. A full-text copy of the Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/ww6234f from PacerMonitor at no charge. Attorneys for the Debtor: Craig G. Margulies Monsi Morales MARGULIES FAITH LLP 16030 Ventura Boulevard, Suite 470 Encino, CA 91436 Telephone: (818) 705-2777 Facsimile: (818) 705-3777 E-mail: Craig@MarguliesFaithLaw.com Monsi@MarguliesFaithLaw.com About Schaefer Ambulance Service Schaefer Ambulance Services, Inc. -- http://www.schaeferamb.com/-- is an emergency medical services provider specializing in basic life support; paramedic; critical care; neonatal; event standbys; and other specialized medical services. The Company offers ground transport for hospitals, urgent care centers, convalescent homes, physicians, insurance companies, fire departments and private/public events. Schaefer Ambulance was founded by Walter Schaefer in 1932. Schaefer Ambulance Services filed a Chapter 11 petition (Bankr. C.D. Cal. Case No. 19-11809) on Feb. 20, 2019. In the petition signed by Leslie Maureen McNeal, treasurer, the Debtor is estimated to have $1 million to $10 million in assets and $1 million to $10 million in liabilities. The case is assigned to Judge Neil W. Bason. Craig G. Margulies, Esq., at Margulies Faith LLP, is the Debtor's counsel. BidMed, LLC, is the asset liquidation broker. SEARS HOLDINGS: Apex, Basil Vasiliou Removed as Committee Members ----------------------------------------------------------------- The U.S. Trustee for Region 2 on March 31, 2020, disclosed in a notice filed with the U.S. Bankruptcy Court for the Southern District of New York that these companies are the remaining members of the official committee of unsecured creditors appointed in the Chapter 11 cases of Sears Holdings Corporation and its affiliates: 1. Pension Benefit Guaranty Corporation 1200 K Street N.W. Washington, D.C. 20005-4026 Attention: Adi Berger, Director Telephone: (202) 326-4000 2. Oswaldo Cruz 23002 Dolores Street Carson, California 90747 (310) 809-6610 3. Winiadaewoo Electronics America, Inc. 65 Challenger Road, #360 Ridgefield Park, New Jersey 07660 Attention: Minje Kim, President Telephone: (201) 552-4950 4. Computershare Trust Company, N.A. 2950 Express Drive South, Suite 210 Islandia, New York 11749 Attention: Michael A. Smith, Vice President Telephone: (631) 233-6330 5. The Bank of New York Mellon Trust Company 601 Travis – 16th Floor Houston, Texas 77002 Attention: Dennis Roemlein, Vice President Telephone: (713) 483-6531 6. Simon Property Group, L.P. 225 W. Washington Street Indianapolis, Indiana 46204 Attention: Ronald M. Tucker Vice President/Bankruptcy Counsel Telephone: (317) 263-2346 7. Brixmor Operating Partnership, L.P. 450 Lexington Avenue – 13th Floor New York, New York 10017 Attention: Patrick Bennison, Vice President Telephone: (212) 869-3000 The names of Apex Tool Group, LLC and Basil Vasiliou did not appear in the notice. Both were appointed as committee members on Oct. 24, 2018, court filings show. About Sears Holdings Sears Holdings Corporation (OTCMKTS: SHLDQ) --http://www.searsholdings.com/-- began as a mail ordering catalog company in 1887 and became the world's largest retailer in the 1960s. At its peak, Sears was present in almost every big mall across the U.S., and sold everything from toys and auto parts to mail-order homes. Sears claims to be is a market leader in the appliance, tool, lawn and garden, fitness equipment, and automotive repair and maintenance retail sectors. Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 US stores between them. Kmart emerged in 2005 from its own bankruptcy. Unable to keep up with online stores and other brick-and-mortar retailers, a long series of store closings has left it with 687 retail stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands as of mid-October 2018. At that time, the Company employed 68,000 individuals, of whom 32,000 are full-time employees. As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total assets, $11.33 billion in total liabilities and a total deficit of $4.40 billion. Unable to cover a $134 million debt payment due Oct. 15, 2018, Sears Holdings Corporation and 49 subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15, 2018. The Hon. Robert D. Drain is the case judge. The Debtors tapped Weil, Gotshal & Manges LLP as legal counsel; M-III Partners as restructuring advisor; Lazard Freres & Co. LLC as investment banker; DLA Piper LLP as real estate advisor; and Prime Clerk as claims and noticing agent. The U.S. Trustee for Region 2 appointed nine creditors, including the Pension Benefit Guaranty Corp., and landlord Simon Property Group, L.P., to serve on the official committee of unsecured creditors. The committee tapped Akin Gump Strauss Hauer & Feld LLP as legal counsel; FTI Consulting as financial advisor; and Houlihan Lokey Capital, Inc. as investment banker. The U.S. Trustee for Region 2 on July 9, 2019, appointed five retirees to serve on the committee representing retirees with life insurance benefits in the Chapter 11 cases. * * * In February 2019, Bankruptcy Judge Robert Drain granted Sears Holdings approval to sell the business to majority shareholder and CEO Eddie Lampert for approximately $5.2 billion. Lampert's ESL Investments, Inc., has won an auction to acquire substantially all of Sears' assets, including the "Go Forward Stores" on a going-concern basis. The proposal will allow 425 stores to remain open and provide ongoing employment to 45,000 employees. SENIOR CARE: Key West Selling All Operating Assets for $1.5M ------------------------------------------------------------ Key West Health and Rehabilitation Center, LLC, an affiliate of Senior Care Centers, LLC, asks the U.S. Bankruptcy Court for the Northern District of Texas to authorize the sale of substantially all of its operating assets to Regal Healthcare Acquisitions, LLC for $1.5 million cash, plus the assumption of the Assumed Liabilities, plus payment of the FHA Payoff, plus payment of the Cure Amounts, and assumption of the obligation to pay Hired Employees PTO Benefits, subject to adjustments set forth in the Regal Operations Transfer Agreement, subject to overbid. Key West is licensed to operate a nursing home in Monroe County. At the Facility, the Debtor is licensed to operate a 120-bed facility located at 5860 W. Junior College Road, Key West, Florida. The Facility operates on real property that the Debtor leases from The Lower Keys Hospital District, which is not a debtor under any chapter of the Bankruptcy Code. The Debtor has received an offer from Regal for the purchase of substantially all of the assets and property utilized with respect to the operation of the Facility pursuant to an OTA between the Debtor and Regal. The Regal Purchased Assets are to be sold and the Debtor will convey the Regal Purchased Assets free and clear of any and all liens, claims, and encumbrances except for certain liens and encumbrances, and certain liabilities, including any liabilities and obligations in connection with the Regal Purchased Assets. Except for the Regal Permitted Liens, the Regal Assumed Liabilities, or as otherwise expressly provided for by the Regal OTA or order of the Court, Regal will have no liability or other obligation of the Debtor arising under or related to any of the Regal Purchased Assets. Pursuant to the Regal OTA, the consideration to be paid by Regal for the Regal Purchased Assets will be the total amount of $1.5 million cash plus the assumption of the Assumed Liabilities, paying the FHA Payoff, paying the Cure Amounts, and assuming the obligation to pay Hired Employees PTO Benefits, subject to adjustments set forth in the Regal OTA. From the Regal Purchase Price, the amount of $150,000 will be reserved in connection with the indemnification provisions set forth in the Regal OTA. The Regal Indemnification Holdback will be held in connection with certain types of indemnification claims more specifically set forth in the Regal OTA and one-half of the Regal Indemnification Holdbackwill be released, after application of claim amounts, six months following the closing and the balance of the Regal Indemnification Holdbacak will be released, after application of claim amounts, 12 months following the Closing. Regal has posted a deposit in the total amount of $150,000 in connection with the Regal OTA. The Debtor will ask a deposit from other Bidders to be posted in escrow with Stichter, Riedel, Blain & Postler, P.A., the Debtor's bankruptcy counsel, in connection with the submission of a bid by a competing bidder. The Deposits will be held by Stichter Riedel. The sale of the Regal Purchased Assets will be on an As-Is, Where-Is basis, except as specifically set forth in the Regal OTA. The Regal OTA may be terminated by mutual consent or pursuant to the other provisions of Article IX of the Regal OTA. The Debtor asks approval of bidding procedures in connection with the sale of the Regal Purchased Assets as to which a Bidder may submit a Bid, including (a) approval of procedures for the submission of competing Bids, (b) approval of a break-up fee and a minimum overbid amount, and (c) approval of the form and manner of notice of the Bid Procedures. The Debtor believes that the Bid Procedures set forth in the Motion will assist in determining the highest and best offer available to the Debtor for the sale of the Offered Assets. The salient terms of the Bidding Procedures are: a. Bid Deadline: No later than 5:00 p.m. (EDT) on the day which is five business days prior to the date of the Sale Hearing or such later date agreed to by the Debtor, in consultation with the Official Committee of Unsecured Creditors in the Debtor's bankruptcy case b. Initial Bid: Bid for the Regal Purchased Assets plus $150,000 c. Deposit: $150,000 d. Auction: An auction to consider any competing Bids in respect of the Offered Assets will be held at the office of Stichter Riedel on the last business day that is at least two days prior to the date of the Sale Hearing. e. Bid Increments: $50,00 f. Sale Hearing: No later than May 15, 2020 g. Break Up Fee: $100,000 In addition to Regal having designated certain prepetition executory contracts to which a Debtor is a party to be assumed and/or assigned to Regal, a Bidder may include Designated Contracts as part of its Bid. The Debtor asks that the Court includes in the Bid Procedures Order the procedures for objections to assumption and assignment of executory contracts. As soon as practicable, but in any event no later than five business days following entry of the Bid Procedures Order, the Debtor will serve the Assumption and Assignment Notice upon each counterparty to an executory contract with the Debtor. A copy of the OTA and the Bidding Procedures is available at https://tinyurl.com/w7xzfyl from PacerMonitor.com free of charge. About Senior Care Centers Senior Care Centers, LLC -- https://senior-care-centers.com/ -- is a Dallas-based, skilled nursing and long-term care industry leader in Texas and Louisiana. Senior Care Centers operates and manages more than 100 skilled nursing and assisted/independent living communities in the states of Texas and Louisiana. On Dec. 4, 2018, Senior Care Centers and 120 of its subsidiaries filed voluntary Chapter 11 petitions (Bankr. N.D. Tex. Lead Case No. 18-33967). The Debtors tapped Polsinelli PC as bankruptcy counsel; Hunton Andrews Kurth LLP as conflicts counsel; Sitrik and Company as communications consultant; and Omni Management Group, Inc. as claims, noticing, and administrative agent. On Dec. 14, 2018, the Office of the U.S. Trustee for the Northern District of Texas appointed an official committee of unsecured creditors in the Chapter 11 Cases. SFKR LLC: Islam Buying Two Tyler Properties for $802K ----------------------------------------------------- SFKR, LLC, asks the U.S. Bankruptcy Court for the Eastern District of Texas to authorize the sale to Irphan Islam or assigns of the following commercial properties located (i) at 2020 Gentry, Tyler, Texas for $80,000, and (ii) at 2030 Gentry, Tyler, Texas for $722,000. The Debtor's business consists of the ownership of a number of pieces of commercial property. It has received a contact for the purchase the Property. The purchase price is $802,000. The purchase price is allocated $722,000 to 2030 Gentry, and $80,000 to 2020 Gentry. Under the terms of the Contract, the Debtor will be paid $580,000 at closing and will receive a Promissory Note for $142,000 secured by a second lien on the Property. The closing is set for April 24, 2020. Texas National Bank ("TNB") holds a first lien on the 2030 Gentry portion of the Property. Ubank holds a first lien on the 2020 Gentry portion of the Property. It is the Debtor's position that pursuant to Loan Agreement between the Debtor and TNB the payoff on this Property to TNB is $283,019. The Debtor would show the payoff to Ubank is $70,000. The Debtor asks that Court authorizes it to sell the Property free and clear of all liens claims and encumbrances and allow the liens against the Property to attach to the proceeds of the sale. It asks the net sales proceeds be placed into the DIP account with all liens attaching to the proceeds and not to be distributed without further order of the Court. Mr Ashgar will show that the property has been marketed both by Mr. Ashgar and by the real estate broker employed by the Debtor. The Debtor believes it is a fair price for the Property. A copy of the Contract is available at https://tinyurl.com/wvommde from PacerMonitor.com free of charge. About SFKR LLC SFKR, LLC, is a privately held company based in Tyler, Texas. Its business consists of the ownership of a number of pieces of commercial property. SFKR, LLC, sought Chapter 11 protection (Bankr. E.D. Tex. Case No. 19-60674) on Oct. 1, 2019. In the petition signed by Shahzad Asghar, managing member, the Debtor was estimated to have assets in the range of $0 to $50,000 and $1 million to $10 million in debt. The case is assigned to Judge Bill Parker. The Debtor tapped Eric A. Liepins, Esq., at Eric A. Liepins, as counsel. SFKR LLC: Islam Buying Tyler Properties for $802K ------------------------------------------------- SFKR, LLC, asks the U.S. Bankruptcy Court for the Eastern District of Texas to authorize the sale to Irphan Islam or assigns of its commercial properties located (i) at 2020 Gentry, Tyler, Texas for $80,000, and (ii) at 2030 Gentry, Tyler, Texas for $722,000. The Debtor's business consists of the ownership of a number of pieces of commercial property. It has received a contact for the purchase the Property. The purchase price is $802,000. The purchase price is allocated $722,000 to 2030 Gentry, and $80,000 to 2020 Gentry. Under the terms of the Contract, the Debtor will be paid $580,000 at closing and will receive a Promissory Note for $142,000 secured by a second lien on the Property. The closing is set for April 24, 2020. The Debtor asks that Court authorizes it to sell the Property free and clear of all liens claims and encumbrances and allow the liens against the Property to attach to the proceeds of the sale. It asks the net sales proceeds be placed into the DIP account with all liens attaching to the proceeds and not to be distributed without further order of the Court. A copy of the Contract is available at https://tinyurl.com/uuzd5ka from PacerMonitor.com free of charge. About SFKR LLC SFKR, LLC, is a privately held company based in Tyler, Texas. Its business consists of the ownership of a number of pieces of commercial property. SFKR, LLC, sought Chapter 11 protection (Bankr. E.D. Tex. Case No. 19-60674) on Oct. 1, 2019. In the petition signed by Shahzad Asghar, managing member, the Debtor was estimated to have assets in the range of $0 to $50,000 and $1 million to $10 million in debt. The case is assigned to Judge Bill Parker. The Debtor tapped Eric A. Liepins, Esq., at Eric A. Liepins, as counsel. SFKR LLC: Kashi Buying Tyler Commercial Property for $800K ---------------------------------------------------------- SFKR, LLC, asks the U.S. Bankruptcy Court for the Eastern District of Texas to authorize the sale of its commercial property located at 15834 FM 2493, Tyler, Texas to Kashi Enterprises, Inc. or assigns for $800,000. The Debtor's business consists of the ownership of a number of pieces of commercial property. It has received a contact for the purchase of one of its properties, the Property. The purchase price is $800,000. Under the terms of the Contract the Debtor will receive $640,000 at closing and the balance $160,000 will be in the form of Promissory Note secured by a second lien on the Property. The closing is set for April 24, 2020. The Debtor asks that Court authorizes it to sell the Property free and clear of all liens claims and encumbrances and allow the liens against the Property to attach to the proceeds of the sale. It asks the net sales proceeds be placed into the DIP account with all liens attaching to the proceeds and not to be distributed without further order of the Court. A copy of the Contract is available at https://tinyurl.com/sgf4xo7 from PacerMonitor.com free of charge. About SFKR LLC SFKR, LLC, is a privately held company based in Tyler, Texas. Its business consists of the ownership of a number of pieces of commercial property. SFKR, LLC, sought Chapter 11 protection (Bankr. E.D. Tex. Case No. 19-60674) on Oct. 1, 2019. The Debtor was estimated to have assets in the range of $0 to $50,000 and $1 million to $10 million in debt. The case is assigned to Judge Bill Parker. In the petition signed by Shahzad Asghar, managing member, the Debtor tapped Eric A. Liepins, Esq., at Eric A. Liepins as counsel. SFKR LLC: Kashi Enterprises Buying Tyler Property for $800K ----------------------------------------------------------- SFKR, LLC, asks the U.S. Bankruptcy Court for the Eastern District of Texas to authorize the sale of one of its commercial properties, the property located 15834 FM 2493, Tyler, Texas to Kasi Enterprises, Inc. for $800,000. Objections, if any, must be filed within 21 days from the service of Motion. The Debtor's business consists of the ownership of a number of pieces of commercial property. It has received a contact for the purchase the Property. The purchase price is $800,000. Under the terms of the Contract the Debtor will receive $640,000 at closing and the balance $160,000 will be in the form of Promissory Note secured by a second lien on the Property. The buyer of the Property is the brother-in-law of Shahzad Asgher. Mr Ashgar is the 100% owner of the Debtor. Mr Ashgar will show that the property has been marketed both by Mr. Ashgar and by the real estate broker employed by the Debtor. The Debtor believes this is a fair price for the property. It had previously filed a Motion to Sell this Property with the Court to the same buyer, however the appraisal performed by the lender for the Buyer did not justify the previous price and the new price was arrived at through arms’-length negotiations. The closing is set for April 24, 2020. The sale will be free and clear of all liens claims and encumbrances. Texas National Bank ("TNB") holds a first lien on the Property. It is Debtor's position that pursuant to Loan Agreement between the Debtor and TNB the payoff on the Property to TNB is $353,774. The Debtor asks the Court to authorize it to sell the Property free and clear of all liens claims and encumbrances and allow the liens against the Property to attach to the proceeds of the sale. The net sales proceeds will be placed into the DIP account with all liens attaching to the proceeds and not to be distributed without further order of the Court. A copy of the Contract is available at https://tinyurl.com/vwkzyl3 from PacerMonitor.com free of charge. About SFKR LLC SFKR, LLC, is a privately held company based in Tyler, Texas. Its business consists of the ownership of a number of pieces of commercial property. SFKR, LLC, sought Chapter 11 protection (Bankr. E.D. Tex. Case No. 19-60674) on Oct. 1, 2019. In the petition signed by Shahzad Asghar, managing member, the Debtor was estimated to have assets in the range of $0 to $50,000 and $1 million to $10 million in debt. The case is assigned to Judge Bill Parker. The Debtor tapped Eric A. Liepins, Esq., at Eric A. Liepins, as counsel. SHEPPARD AND SON: Massey/Griffin Buying Cordele Property for $102K ------------------------------------------------------------------ Sheppard and Son Properties, LLC, asks the U.S. Bankruptcy Court for the Middle District of Georgia to authorize the sale of the real property on Schedule A/B commonly known as 1305 Drayton Road, Cordele, Georgia to Raymond Massey or Griffin Lumber Co. for $102,000, cash. A hearing on the Motion is set for Dec. 20, 2019 at 10:00 a.m. The Debtor valued the real estate at $97,000. The real estate is subject to a Tax Sale Deed held by Griffin Lumber Co., a creditor listed on Schedule D, in the amount of $56,213 and listed as the Class 5 claimant under the plan. The Debtor proposes to sell the acreage portion of the property less and except the 0.953 acres with house thereon, in a cash sale in the total amount of $120,000 for the whole of the property to either (1) third-party purchaser Raymond Massey in full or (2) to Griffin Lumber Co., a creditor, in full, or (3) in such parts and parcels as Massey and Griffin Lumber may agree to, so long as the total purchase price remains the same. Both Massey and Griffin Lumber are referred to singularly and jointly as the Buyer. The Buyers have no interest in the Debtor and are neighboring landowners. The Debtor will transfer a Warranty Deed to the Buyer. The Buyer will be responsible for future real estate taxes and insurance. In conjunction with the deal, the Debtor will use funds obtained to pay the claim of Griffin Lumber in its entirety at closing to redeem the property from the tax sale deed. The Department of Justice may claim a lien on the property from that certain restitution judgment entered against Greene W. Sheppard individually and filed of record in GED Book 25, Page 70 on Aug. 7, 2013 in the Superior Court of Crisp County. The previous titled owner of the property however was G. Wylie Sheppard, Jr. according to the deed records. By information and belief, Greene W. Sheppard is current on payment obligations to the Department of Justice pursuant to a consent agreement. Furthermore, the Department of Justice obtained the benefit of receipt of the excess tax sale proceeds from this property. The Department of Justice has agreed to release any lien or encumbrance that it may have against this property for a stated release price of $10,000, which will be paid from the proceeds at closing. The remainder of funds received, after subtracting closing costs and other charges directly related to the sale and the payments to the two claimants listed, will be used to provide additional funding for the Chapter 11 plan. Through the deal, the Debtor will realize full value for its property interest at a value greater than that provided in the schedules, provide full payment to a creditor, and eliminate the need to pay future taxes and insurance, while preserving the actual income stream on the property in the form of rental payments on the retained house and 0.953 acre lot. The completion of this sale is in the best interest of the Debtor and the creditors. The Buyer is paying a fair price for the property. No real estate broker has been retained for this transaction. The Debtor asks that the Court approves the transaction and authorize Debtor to execute any instruments necessary to effectuate the sale in accordance with FRBP 6004(f)(2). It asks a waiver of the 14-day stay set forth in FRBP 6004(h). A copy of the Exhibit A is available at https://tinyurl.com/sjx3va3 from PacerMonitor.com free of charge. About Sheppard and Son Properties Sheppard and Son Properties, LLC, a nonresidential building operator in Cordele, Georgia, filed a Chapter 11 petition (Bankr. M.D. Ga. Case No. 18-11388) on Nov. 6, 2018. In the petition signed by Greene Wylie Sheppard, Jr., sole member, the Debtor disclosed $1,202,487 in total assets and $224,757 in total liabilities. The case is assigned to Judge Austin E. Carter. The Debtor is represented by Emmett L. Goodman, Jr., LLC. SKLARCO LLC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Sklarco, LLC 5395 Pearl Parkway Suite 200 Boulder, CO 80301 Business Description: Sklarco, LLC is an independent oil and gas exploration and production company owned and managed by Howard F. Sklar. Chapter 11 Petition Date: April 1, 2020 Court: United States Bankruptcy Court District of Colorado Case No.: 20-12380 Judge: Hon. Michael E. Romero Debtor's Counsel: Lee M. Kutner, Esq. KUTNER BRINEN, P.C. 1660 Lincoln Street, Suite 1850 Denver, CO 80264 Tel: 303-832-2400 E-mail: lmk@kutnerlaw.com Estimated Assets: $10 million to $50 million Estimated Liabilities: $10 million to $50 million The petition was signed by Howard Sklar, manager. A copy of the petition is available for free at PacerMonitor.com at: https://is.gd/yKGOBl List of Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ 1. East West Bank Unknown Treasury Department 135 N. Los Robles Ave, Ste 600 Pasadena, CA 91101 2. Davis Southern Joint $156,703 Operating Company, LLC Interest 1500 McGowen Street, Suite 200 Payments Houston, TX 77004 3. Pruet Production Co Joint $43,300 PO Box 11407 Interest Birmingham, AL 35246-1129 Payments 4. Par Minerals Corporation Joint $28,746 701 Texas Street Interest Shreveport, LA 71101 Payments 5. Devon Energy Joint $21,002 Production Co., LP Interest PO Box 842485 Payments Dallas, TX 75284-2485 6. Hilcorp Energy Company Joint $9,571 Dept. 412 Interest P.O. Box 4346 Payments Houston, TX 77210-4346 7. CCI East Texas Joint $7,582 Upstream, LLC Interest Castleton Commodities Payments Upstream, LLC 811 Main Street, Suite 1500 Houston, TX 77002 8. Amplify Energy Operating, LLC Joint $6,326 500 Dallas St., STE Interest 1700 Houston, TX 77002 Payments 9. Grizzly Operating, LLC Joint $5,581 Grizzly Energy, LLC Interest PO Box 46094 Payments Houston, TX 77210-6094 10. Mission Creek Joint $4,913 Resources, LLC Interest 25511 Budde Rd, Payments Ste 601 Spring, TX 77380 11. Basa Resources, Inc. Joint $4,137 14875 Landmark Interest Blvd., 4th Floor Payments Dallas, TX 75254 12. Stroud Petroleum, Inc. Joint $4,084 P.O. Box 565 Interest Shreveport, LA 71162-0565 Payments 13. BPX Operating Company Joint $2,717 501 Westlake Park Blvd Interest Houston, TX 77079 Payments 14. Urban Oil & Gas Joint $2,180 Group, LLC Interest Department #41380 Payments P. O. Box 650823 Dallas, TX 75265 15. Palmer Petroleum Inc. Joint $2,003 330 Marshall Street Interest Suite 1200 Payments Shreveport, LA71101 16. Dorfman Production Company Joint $1,462 4925 Greenville Ave, St 900 Interest Dallas, TX 75206 Payments 17. Grigsby Petroleum Inc. Joint $1,418 333 Texas St. Suite 2285 Interest Shreveport, LA 71101 Payments 18. Cimarex Energy Co. Joint $1,229 #7740234023 Solutions Center Interest Chicago, IL 60677-4000 Payments 19. Highmark Energy Operating, LLC Joint $1,224 c/o Oil & Gas Business Solutions,Inc. Interest 4849 Greenville Ave., Ste 1250 Payments Dallas, TX 75206 20. Kirkpatrick Oil Company, Inc. Joint $1,213 PO Box 248885 Interest Oklahoma City, OK 73124-8885 Payments SMARTER TODDLER: Plan to be Funded by $4.5M Business Sale Proceeds ------------------------------------------------------------------ Debtor Smarter Toddler Group, LLC, filed with the U.S. Bankruptcy Court for the Southern District of New York a Disclosure Statement in connection with its Chapter 11 Liquidating Plan. Pursuant to an Asset Purchase Agreement, dated Nov. 3, 2014, between Bright Horizons Children's Centers LLC, as purchaser, and Robert and Kettia Ming and two companies through which they owned those two centers, as sellers, those centers were sold for approximately $6.7 million, net of post-closing adjustments. During the Debtor's Chapter 11 case, the Debtor negotiated a private sale of its business for $4,500,000, subject to adjustments and credits. This purchase price, together with the Debtor's cash on hand, is expected to yield a 100% recovery to all allowed unclassified and classified creditors with a return to equity. After arm's-length negotiations, the Debtor and the purchaser executed an Asset Purchase Agreement for the purchase price of $4,500,000, subject to adjustments. The APA is strictly conditioned upon being a private sale not subject to higher or better offers or a sales procedure. Notwithstanding, the sale proceeds are sufficient to pay all creditors in full with a return to the Debtor's interest holders, who have unanimously approved the APA. Accordingly, the Debtor has authority to approve the Sale under relevant case law, subject to confirmation of the Plan. Holders of Class 3 General Unsecured Claims will recover 100% of the amount of their Allowed Claim in Cash within 30 days of the later of the Effective Date or the Sale Closing Date from the Plan Distribution Fund, together with interest after distribution to all unclassified, Administrative, Class 1 and 2 Claims and the Post-Confirmation Reserve, in full and final satisfaction of its Claims as against the Debtor. The Debtor estimates these claims to total no greater than $1,900,000. Class 3 Claims are not impaired under the Plan and are deemed to accept the Plan. Class 4 consists of the holders of interests in the Debtor. Class 4 interests are held 28% by Kettia Ming, 27% by Robert Ming, 25% by Giordano Consulting Inc., 5% by Joshua Rahn, 12% by Abe Shampaner and 3% by Brett Shampaner. Class 4 interests will receive, on a pro rata basis, the balance, if any, of the Plan Distribution Fund, after distribution in full to all unclassified, Administrative, Class 1, 2 and 3 Claims and the Post-Confirmation Reserve. Class 4 interests are not impaired under the Plan and are deemed to accept the Plan. The Plan shall be funded with the sale proceeds ($4,500,000), which will be the primary source, as well as cash on hand in the Debtor's estate as of the sale closing date in the estimated amount of $185,705. Such assets will constitute the Plan Distribution Fund, which shall be held pursuant to Section 345 of the Bankruptcy Code and ultimately distributed by Davidoff Hutcher & Citron LLP (the Disbursing Agent) in accordance with the terms of the Plan. A full-text copy of the Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/unho92l from PacerMonitor at no charge. Attorneys for the Debtor: DAVIDOFF HUTCHER & CITRON LLP 605 Third Avenue New York, New York 10158 Tel: (212) 557-7200 Robert L. Rattet, Esq. Jonathan S. Pasternak, Esq. About Smarter Toddler Group Smarter Toddler Group, LLC -- https://www.smartertoddler.net/ -- is a child care - pre school in New York. It offers early childhood education, top tier private preschools, pre-k, child day care centers, nursery, infant childcare, baby activities, toddler enrichment classes, art, music, movement classes, science, yoga, dance, languages, sign language, literacy, kindergarten prep, GNT gifted and talented test prep tutoring, G&T preparation. Smarter Toddler Group sought Chapter 11 protection (Bankr. S.D.N.Y. Case No. 19-13097) on Sept. 27, 2019, in Manhattan, New York. In the petition signed by Kettia Ming, manager, the Debtor was estimated to have assets between $1 million and $10 million, and liabilities of the same range. Judge Shelley C. Chapman is assigned the case. Storch Amini PC is the Debtor's legal counsel. SPECTRUM BRANDS: S&P Downgrades ICR to 'B'; Outlook Negative ------------------------------------------------------------ S&P Global Ratings lowered its issuer credit rating on U.S.-based Spectrum Brands Holdings Inc. to 'B' from 'B+'. At the same time, S&P is lowering its issue-level rating on the company's $800 million revolver to 'BB-' from 'BB' and its issue-level rating on the company's senior unsecured notes to 'B' from 'B+'. S&P is also revising its recovery rating on the unsecured notes to '4' from '3', though its '1' recovery rating on the revolver remains unchanged. "Sales and profit will decline due to the Covid-19 pandemic and global recession, causing its credit metrics to deteriorate. The company's operating performance is susceptible to consumer discretionary spending and the ongoing emphasis on social distancing to reduce the spread of the coronavirus will likely weigh dramatically on consumer spending in 2020. In addition, it is possible that the U.S. could be in a protracted recession following the economic shock from COVID-19. Therefore, we see an increasing probability of weakening demand due to the disruption of consumer discretionary spending, which could cause the company's profits and cash flow to deteriorate materially. We view the company's Hardware and Home Improvement (HHI) and Home and Personal Care (HPC) segments as more susceptible to an economic downturn than its other businesses," S&P said. The negative outlook reflects the potential for a lower rating in the next 12 months if the company's operating performance decline substantially amid Covid-19 pandemic and global recession. "We could lower the rating if the housing market, new builds and remodel activities slow significantly, leading to substantial decline in its HHI segment, or if disruption in consumer discretionary spending leads to meaningful weaker demand in HPC segment leading to a significant pressure on profitability and causing leverage to increase over 7x on sustained basis. We could also lower our rating if the company's covenant cushion narrows significantly and drops below 10%," S&P said. "We could revise our outlook on Spectrum to stable if its business model appears resilient despite the slowing economy and the company improves its profitability, significantly reduces its restructuring costs, and benefits from its global productivity improvement plan such that its leverage remains below the mid-5x area," the rating agency said. SPIRIT AEROSYSTEMS: S&P Affirms 'BB' ICR; Ratings on Watch Neg. --------------------------------------------------------------- S&P Global Ratings affirmed its ratings on Spirit AeroSystems Inc., including the 'BB' issuer credit rating, and placed them on CreditWatch with negative implications. The significant decline in global air travel due to the coronavirus could result in increased order deferrals or cancellations from airlines, prompting Boeing and Airbus, Spirit's main customers, to reduce production. "This could put further pressure on the company's earnings and cash flow in 2020, which we had already expected to be weak due to the production halt on the 737 MAX. The coronavirus could also delay certification of the MAX due to government restrictions on travel or employee illnesses. We do not expect the company's military programs to be materially affected unless production is disrupted due to the pandemic," S&P said. Liquidity should be sufficient for the company's financial and operational needs in 2020 unless there is a material deterioration in cash flow. At Dec. 31, 2019, the company had almost $2.4 billion of cash, but no revolver availability because it was fully drawn. The company subsequently put in place a $375 million delayed-draw term loan in case MAX cash outflows were higher than expected, but this facility is only available until Sept. 15, 2020, or 45 days after the MAX is certified. S&P's base case assumed free cash flow to be negative $350 million for 2020, but the first quarter was likely higher than that, with flat to modestly positive cash flow in the second half of the year. Therefore, cash balances could now be $500 million-$600 million below the year-end balance since the company also completed a $120 million acquisition. "We will resolve the CreditWatch placements when we have more information on possible production cuts by Boeing or Airbus or further delays to MAX certification related to the coronavirus, as well any disruptions to production. We could lower the rating if these factors result in earnings or cash flow being much lower than we expect in 2020 and we believe funds from operations to debt will not increase above 20% in 2021 or liquidity becomes constrained. Other factors unrelated to the coronavrius that could result in a downgrade include: certification of the MAX being delayed further, MAX production at a lower rate than we currently expect, the company cannot reduce costs sufficiently during the period of lower production or encounters problems restarting production, or cash outflows are significantly higher than we forecast in 2020," S&P said. STARWOOD PROPERTY: S&P Downgrades ICR to 'BB-'; Outlook Negative ---------------------------------------------------------------- S&P Global Ratings said it lowered its issuer credit rating on Starwood Property Trust Inc. to 'BB-' from 'BB'. The outlook is negative. S&P also lowered its rating on the company's senior secured debt to 'BB-' from 'BB' and senior unsecured debt to 'B+' from 'BB-'. The downgrade indicates that the fallout from COVID-19 has increased the risk that Starwood will experience losses and receive margin calls on its securities and loan portfolio investments. The company ended 2019 with approximately $4.3 billion of borrowings under secured repurchase facilities backed by commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS), and commercial real estate loan investments, with $478 million of unrestricted cash on balance sheet. The company also ended the year with $167 million of approved and undrawn capacity on its repurchase agreements. Subsequent to year-end, the company also received a large repayment of a loan and expects to severely reduce new originations in the short term as it looks to boost liquidity. As of March 16, 2020, the company reported $885 million of combined cash and approved but undrawn financing lines. The negative outlook reflects the potential that Starwood's investment performance will suffer and that this will lead to margin calls amid the current difficult operating conditions. S&P expects that over the next 12 months the company will operate with leverage of approximately 2.50x-2.75x debt to adjusted total equity. "We could lower the ratings if Starwood increases leverage materially, if declining commercial real estate property valuations and weakening loan performance strain liquidity, or if the company takes large impairments in its investment portfolio," S&P said. "We could revise the outlook to stable if the company's investment performance stabilizes and the outlook regarding the full impact of COVID-19 is clearer," the rating agency said. T-MOBILE US: Fitch Assigns BB+ LT IDR & Alters Outlook to Stable ---------------------------------------------------------------- Fitch Ratings assigns Long-Term Issuer Default Ratings of T-Mobile US, Inc. (T-Mobile) and T-Mobile USA, Inc. at 'BB+' following the close of the merger with Sprint Corporation (Sprint). Fitch also assigned final ratings to T-Mobile USA, Inc.'s $4 billion secured credit facility, $4 billion secured term loan and proposed multi-tranche secured notes at 'BBB-'/'RR1' and the unsecured senior notes at 'BB+'/'RR3'. Fitch removed Sprint's Rating Watch Positive and upgraded the IDRs of Sprint and Sprint Communications, Inc. to 'BB+' from 'B+'. Fitch also upgraded the unsecured senior notes at Sprint, SCI and Sprint Capital Corp. to 'BB+'/'RR4' from 'B+'/'RR4'. On a consolidated basis, the T-Mobile/Sprint combination is expected to have a materially improved business profile with greater scale and improved network capabilities that should enhance its long-term competitive position to gain further market share. The revision of the Outlook to Stable from Positive reflects the change in expectations with the pace for deleveraging versus previous assumptions given the numerous unknowns related to the duration and severity of the coronavirus outbreak, the resulting material negative impact to consumers and the potential negative effects on T-Mobile's financial operating results. Fitch expects T-Mobile's pro forma adjusted core telecom leverage (adjusted debt/EBITDAR) for 2020 will be high, estimated in the upper-4x range. Fitch expects material deleveraging during the forecast period. This is supported by EBITDA growth driven by substantial cost synergies and debt reduction, with adjusted core telecom leverage projected in the low 4x range by 2022 compared to previous expectations in the upper-3x range. A more protracted business interruption from the coronavirus pandemic and/or severe downturn could slow expected deleveraging pace. KEY RATING DRIVERS Implications of Coronavirus: Fitch expects unprecedented effects due to the coronavirus pandemic across numerous sectors, such as mandated or proactive temporary closures of retail stores in "non-essential" categories and the extension on government guidelines for social distancing through April 30. T-Mobile has closed about 80% of store locations since mid-March, with 20% of stores across the country open to provide service for customers. T-Mobile intends to reopen a number of stores throughout April where allowed by local and state mandates. Numerous unknowns remain, including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved; the economic conditions resulting from the pandemic, including unemployment and household income trends, government support of business and consumers; and effects on consumer behavior. Fitch believes the telecom sector has a lower level of risk, particularly when compared to other sectors, such as airlines, retail: nonfood, restaurants, lodging and leisure, automotive, and media, given the integral nature of wireless services in consumer's day-to-day lives with predictable recurring payments supported by low postpaid churn levels. As such, Fitch believes wireless phone services have a high position in consumer priority payments. Given the abrupt changes in general economic conditions resulting from the coronavirus — a quick rise in unemployment and spiking jobless claims for a large portion of the population base — Fitch expects the wireless industry, which includes T-Mobile, will experience an increase in service termination and default of device-financing plans. T-Mobile's exposure to the subprime consumer category with subprime receivables as a percent of total EIP gross receivables was at 47% and 42% for T-Mobile and Sprint, respectively, at the end of 2019 based on financial filings. Fitch's current forecast envisions a scenario with general improvements beginning in the latter half of the second quarter in 2020, without wide-scale recurrences of lockdowns during the second half of 2020 as consumer spending gradually rebounds. Consequently, Fitch revised the forecast for T-Mobile to include pro forma revenue expectations in the mid-$70 billion range compared to previous expectations in upper-$70 billion range and pro forma EBITDA (less leasing revenue) in the mid-teen range compared to previous expectations in the upper-teen range. Over the forecast period in 2023, EBITDA is projected to increase to roughly $20 billion compared to the low-$20 billion range with FCF of roughly $6 billion compared to previous expectations of $8 billion. Merger Drives Scale Benefits: The combination of T-Mobile and Sprint is expected to create significant scale, asset and synergy benefits that should materially improve the combined entities' long-term competitive position, particularly for 5G-network capabilities. T-Mobile is expected to target new and/or improved growth opportunities across multiple segments, including broadband replacement, enterprise, rural, internet of things (IoT) and over-the-top video. The larger combined spectrum portfolio and selective rationalization of Sprint's network should materially enhance and further densify T-Mobile's existing network, resulting in greater speed, capacity, capabilities and geographic reach. Material Deleveraging Expected: Based on Fitch adjustments, T-Mobile's pro forma adjusted core telecom leverage is projected in the upper-4x range for 2020, which is higher than previous expectations in the mid-4x range given uncertainty around financial effects from the coronavirus. Fitch believes deleveraging will occur over the forecast period supported by EBITDA growth that is driven by substantial cost synergies and debt reduction due to FCF growth with excess cash used to repay maturing and prepayable debt. This results in adjusted core telecom leverage in the mid-4x range at the end of 2021 and low-4x range in 2022, about a roughly 12-month delay in the deleveraging trajectory from previous expectations. A more protracted business interruption from the coronavirus pandemic and/or severe downturn could further slow expected deleveraging pace. Synergies, Material Execution Risk: The combined company expects to realize substantial synergies with an expected $6+ billion in run-rate cost synergies following completion of integration plans, representing a net-present value of approximately $43 billion. Fitch believes these synergies are largely achievable due to good line of sight on network-related cost reductions that constitute the majority of cost benefits. Given the scope of the transaction, execution risk with network decommissioning and subscriber migration to T-Mobile's network is high. Fitch believes T-Mobile has a good integration track record following past acquisitions. Regulatory Risk Substantially Reduced: Fitch believes regulatory risk post-merger as substantially reduced following the favorable decision from the federal court judge combined with the state attorney general's decision not to appeal the verdict. The merger remains subject to certain closing conditions, including additional court proceedings (Tunney Act) and approval from the California Public Utilities Commission (CPUC). The CPUC issued a proposal mid-March to approve the merger subject to certain conditions being applied, including buildout requirements, job creation and offerings for low-income customers. Secured Debt Notching: The T-Mobile USA secured debt is expected to be guaranteed on a secured basis by all wholly owned domestic restricted subsidiaries of T-Mobile and Sprint. However, the guarantees at Sprint, SCI, and Sprint Capital Corp. would be unsecured due to secured debt restrictions in the Sprint senior notes indentures. For rated entities with IDRs of 'BB-' or above, Fitch does not perform a bespoke analysis of recovery upon default for each issuance. Instead, Fitch uses notching guidance whereby an issuer's secured debt can be notched up to two rating levels, but notching is capped at 'BBB‒' for IDRs between 'BB+' and 'BB-'. The secured debt (credit facility, term loan and notes) at T-Mobile would receive a one-notch uplift from the IDR. This would reflect superior recovery prospects at the senior secured level of the pro forma capital structure, incorporating the value of the combined wireless network, subscriber base and spectrum portfolio. Unsecured Debt Notching: T-Mobile USA's unsecured notes will be guaranteed on an unsecured basis by T-Mobile US, Inc. and its wholly owned domestic restricted subsidiaries. As a result of the merger agreement, T-Mobile USA senior unsecured notes will also receive unsecured guarantees from all wholly owned domestic restricted subsidiaries of Sprint (subject to customary exceptions). For the Sprint senior unsecured notes, T-Mobile and T-Mobile USA will provide downstream unsecured guarantees to the senior notes at Sprint, SCI and Sprint Capital Corp. However, T-Mobile operating companies will not provide an upstream guarantee to Sprint's unsecured notes at Sprint, SCI or Sprint Capital Corp. As a result, Fitch views the T-Mobile USA senior notes as having a structurally superior position with respect to recovery value compared with the Sprint senior notes due to the guarantee structure. Sprint senior notes do not benefit from a guarantee from T-Mobile operating subsidiaries, only from T-Mobile USA and T-Mobile. With T-Mobile's expected secured leverage materially less than 4x, Fitch does not view structural subordination as being present to where recovery prospects at the unsecured level are impaired below the 'RR4' level. Supported by the strong underlying asset value, the T-Mobile USA senior notes would have a 'RR3' recovery, and Sprint's senior notes would have a 'RR4' recovery. Parent Support: A moderate parent subsidiary linkage exists for the merged T-Mobile, resulting in a one-notch uplift to the standalone IDR. The operational and strategic linkages are strong when combined with material benefits derived from Deutsche Telekom AG (DT) ownership through combined global purchasing scale that provides significant benefits for network, handset and general procurement. DT is expected to consolidate T-Mobile's financials and have perpetual voting proxy over SoftBank's T-Mobile shares, subject to certain conditions. Both parents will also be subject to four-year equity lockup agreements, subject to certain exceptions. Legal linkages with T-Mobile are weak given the lack of parent guarantees or cross default to parent debt. DERIVATION SUMMARY On a consolidated basis, the combination of T-Mobile and Sprint is expected to have a materially improved business profile that would enhance its competitive position relative to Verizon Communications Inc. (A-/Stable) and AT&T Inc. (A-/Stable) as on a standalone basis, both T-Mobile and Sprint lack sufficient scale and resources to compete across certain market segments. The combination would enable T-Mobile to build a more expansive national 5G network leveraging a materially larger spectrum portfolio. It would also expand growth opportunities into other sub-segments including video, broadband, enterprise, rural and IoT. Verizon's rating reflects the relatively strong wireless competitive position, as demonstrated by its high EBITDA margins, low churn, extensive national coverage and lower leverage. AT&T's rating reflects its large-scale operations, diversified revenue streams by customer and technology, and relatively strong operating profitability. Fitch believes T-Mobile has higher exposure to the subprime consumer category than Verizon. Based on receivables data from Verizon's $1.6 billion securitization trust (1Q20), the weighted average FICO score for the receivables was 711, with roughly 70% of the portfolio backed by FICO scores over 650 and more than 50% of the portfolio over 700 as of Dec. 31, 2019. T-Mobile and Sprint's reported subprime receivables as a percent of total EIP gross receivables were at 47% and 42%, respectively, at the end of 2019. T-Mobile has generated strong operating momentum during the past several years due to a well-executed challenger strategy. The company has taken material market share from the other three national operators and caused both AT&T and Verizon to more aggressively adapt and respond to these offerings, such as equipment installment and unlimited data plans. On a merged basis, T-Mobile's postpaid wireless business would have similar wireless scale as AT&T but would be materially smaller than Verizon. Given the strong subscriber momentum underpinned by its Un-carrier branding strategy, Fitch expects T-Mobile will continue to close the share gap against its two larger peers. T-Mobile would have a moderately larger scale than Charter Communications Operating, LLC's (BB+/Stable), with a relatively similar profile for gross leverage (total adjusted debt/EBITDAR) and lower secured leverage. KEY ASSUMPTIONS -- Fitch's Key Assumptions Within the Rating Case for the Issuer -- Total pro forma revenues in the mid-$70 billion range, growing over the forecast period of 2023 in the low-single digits; -- Pro forma EBITDA (less leasing revenue) in the mid-teen range, growing over the forecast period to roughly $20 billion in 2023; -- Pro forma total debt, excluding tower obligations and capital leases, expected in the upper $60 billion range, including an expected secured debt mix (excluding tower obligations and capital leases) of roughly $30 billion; -- FCF ramping over the forecast period to $6 billion in 2023; -- Pro forma core telecom leverage in the upper-4x range in 2020, mid-4x range in YE2021 and low-4x by YE2022. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Strong execution and progress on Sprint integration plans while limiting disruption in the company's overall operations that materially reduces execution risk; -- A strengthening operating profile as the company captures sustainable revenue and cash flow growth due to realized synergy cost savings and continued strong operating momentum due to increased postpaid and prepaid subscribers; -- Reduction and maintenance of core telecom leverage (total debt/EBITDA) below 3x and lease adjusted core telecom leverage (total adjusted debt/EBITDAR) below 4.0x; Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Additional leveraging transaction, or adoption of a more aggressive financial strategy that increases core telecom leverage (total debt/EBITDA) beyond 4x and lease adjusted core telecom leverage (total adjusted debt/EBITDAR) beyond 5x on a sustained basis in the absence of a credible deleveraging plan; -- Weakening of parent support that results in Fitch assessing a moderate linkage no longer exists; -- Perceived weakening of its competitive position; lack of execution on integration plans or failure of the current operating strategy to produce sustainable revenue, strengthening of operating margins and cash flow growth. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: T-Mobile closed the merger using its committed financing that included a $19 billion 364-day secured bridge loan facility with a total tenor of 2 years including extensions, $4 billion seven-year secured term loan facility and $4 billion five-year secured revolving credit facility. Fitch expects the combined entity would have substantial liquidity and diversified market access to appropriately manage liquidity risks. Balance sheet cash is expected to be substantial, supported by secured revolver availability of $4 billion at transaction close. FCF generation is expected to increase materially driven by the realization of run-rate cost synergies and a moderation in capital spending in the fourth year. Fitch's forecast assumes FCF ramping over the forecast period to approximately $6 billion in 2023. T-Mobile's expected liquidity position greatly enhances financial flexibility throughout the integration process given the uncertainties around the level, timing of cash requirements and the larger debt maturity towers due in part to legacy capital structures, principally after 2020. The proposed secured notes issuance provides increased certainty with the capital structure and maturity profile following the use of the secured bridge loan facility to close the merger. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS For T-Mobile, unless otherwise disclosed in this section, the highest level of Environmental, Social and Governance (ESG) credit relevance is a score of 3 — ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Sprint Corporation: 4.2; Customer Welfare - Fair Messaging, Privacy & Data Security: 4, Management Strategy:4 On a stand-alone basis. Sprint had ESG scores of 4 for Management Strategy and Customer Welfare, Product Safety, Data Security (SCW). This was due to weak brand strength and operational challenges, as demonstrated by its poor subscriber metrics and position as the fourth operator in a market dominated by much larger players. Sprint also had significant network issues in the past which caused higher network churn with its network limited in certain areas. This is no longer an ESG concern following the merger with T-Mobile due to the selective rationalization of Sprint's network into T-Mobile's that should materially enhance and further densify T-Mobile's existing network, resulting in greater speed, capacity, capabilities and geographic reach. T-MOBILE USA: Moody's Cuts Senior Unsecured Rating to Ba3 --------------------------------------------------------- Moody's Investors Service has assigned Baa3 ratings to T-Mobile USA, Inc.'s new senior secured credit facilities, comprised of a $4 billion five-year senior secured revolving credit facility (undrawn) and $4 billion seven-year senior secured term loan, and proposed senior secured notes of various maturities in USD and/or Eurodollar denominations. Moody's has affirmed T-Mobile's Ba2 corporate family rating and Ba2-PD probability of default rating and downgraded its senior unsecured rating to Ba3 from Ba2, concluding a review for downgrade on these notes that was initiated on April 29, 2018. A $19 billion 364-day secured bridge loan facility, drawn in full today and equal in priority ranking with the Secured Credit Facilities and Secured Notes, is unrated and is expected to be partially repaid with proceeds from the proposed new Secured Notes. Proceeds from the Secured Credit Facilities and Secured Bridge Facility refinanced portions of the balance sheets of Sprint Corporation and T-Mobile with its completion of the business combination of T-Mobile US, Inc., parent of T-Mobile, and Sprint. The downgrade of T-Mobile's unsecured debt reflects the significant increase in the proportion of secured debt in the pro forma capital structure of the combined company. T-Mobile's SGL-1 speculative grade liquidity rating is unchanged. The outlook remains stable. The Secured Credit Facilities and Secured Bridge Facility was primarily used to repay T-Mobile's existing term loan and revolving credit facilities held by Deutsche Telekom AG (DT, Baa1 negative), a portion of unsecured notes held by DT, existing term loan and revolving credit facilities and accounts receivable facilities held at Sprint's wholly-owned subsidiary Sprint Communications, Inc. (SCI), Sprint's guaranteed unsecured notes due 2028, and for transaction fees and expenses. As part of this action, Moody's has upgraded the senior unsecured notes of Sprint itself and SCI to B1 from B3, and the unsecured notes of Sprint Capital Corporation (SCC) to B1 from B3 reflecting the guarantees from Sprint itself and SCI on a senior unsecured basis. This rating action concludes a review for upgrade on these notes that was initiated on April 29, 2018. The ratings on all of the unsecured notes of Sprint, SCI and SCC also reflect their junior-most position in the pro forma capital structure of the combined company and downstream unsecured guarantees from T-Mobile US and T-Mobile. With the Merger's close, T-Mobile remains a wholly-owned subsidiary of T-Mobile US and Sprint becomes a wholly-owned subsidiary of T-Mobile US. DT and SoftBank Group Corp. (SoftBank, Ba3 RUR downgrade), as well as public shareholders of T-Mobile US and Sprint, now own the equity of the combined company, with T-Mobile as the successor company operating under the T-Mobile brand. SoftBank has granted a proxy to vote its T-Mobile shares to DT subject to certain exceptions. Moody's also withdrew the following ratings: Sprint's B2 CFR, B2-PD PDR, B1 rating on Sprint's guaranteed unsecured notes due 2028, and SCI's Ba2 senior secured rating. With the Merger's close, Sprint's guaranteed unsecured notes due 2028 and SCI's senior secured debt were repaid. Upgrades: Issuer: Sprint Capital Corporation Senior Unsecured Regular Bond/Debenture, Upgraded to B1 (LGD5) from B3 (LGD5) Issuer: Sprint Communications, Inc. Senior Unsecured Regular Bond/Debenture, Upgraded to B1 (LGD5) from B3 (LGD5) Issuer: Sprint Corporation Senior Unsecured Regular Bond/Debenture, Upgraded to B1 (LGD5) from B3 (LGD5) Downgrades: Issuer: T-Mobile USA, Inc. Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 (LGD4) from Ba2 (LGD4) Assignments: Issuer: T-Mobile USA, Inc. Senior Secured Bank Credit Facility, Assigned Baa3 (LGD2) Gtd Senior Secured Regular Bond/Debenture, Assigned Baa3 (LGD2) Outlook Actions: Issuer: T-Mobile USA, Inc. Outlook, Remains Stable Issuer: Sprint Capital Corporation Outlook, Changed To No Outlook From Rating Under Review Issuer: Sprint Communications, Inc. Outlook, Changed To No Outlook From Rating Under Review Issuer: Sprint Corporation Outlook, Changed To No Outlook From Rating Under Review Affirmations: Issuer: T-Mobile USA, Inc. Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Withdrawals: Issuer: Sprint Communications, Inc. Senior Secured Bank Credit Facility, Withdrawn, previously rated Ba2 (LGD2) Senior Secured Regular Bond/Debenture, Withdrawn, previously rated Ba2 (LGD2) Issuer: Sprint Corporation Probability of Default Rating, Withdrawn, previously rated B2-PD Speculative Grade Liquidity Rating, Withdrawn, previously rated SGL-3 Corporate Family Rating, Withdrawn, previously rated B2 Senior Unsecured Regular Bond/Debenture, Withdrawn, previously rated B1 (LGD3) RATINGS RATIONALE T-Mobile's post-Merger credit profile reflects governance considerations, specifically its expectation that the company's financial policy will focus on improving leverage to under 4x, the company's large scale of operations, extensive asset base and enhanced industry market position which Moody's believes will align the company on a post-merger subscriber basis to very near AT&T Inc. (AT&T, Baa2 stable). Moody's expects T-Mobile to continue to capture market share following the transaction due to its focus on customer service, simple products, competitive price plans and enhancements to customer value. Moody's projects that the transaction will result in the combined company's leverage peaking near 4.5x (Moody's adjusted) one year after the Merger's close, and falling towards 4x two years after and below 4x thereafter. Moody's estimates free cash flow will be approximately breakeven in the first year based on revised integration benefits compared with its initial expectations. Moody's expects free cash flow will steadily ramp thereafter, with meaningful growth potential in the third year and beyond. Moody's believes that the combination of T-Mobile US and Sprint will substantially improve the combined company's cost structure enabling it to invest in its network as the company prepares to further develop capacity for 5G technology applications. In addition, T-Mobile could benefit from its affiliation with its controlling shareholder DT, although Moody's does not impute any credit support to the rating from DT. Moody's expects T-Mobile to maintain committed liquidity sufficient to address 12-18 months of total cash needs, including debt maturities. It will need to maintain access to multiple segments of the debt capital markets to allow it to comfortably address upcoming maturities. Moody's believes T-Mobile's business plan at the Merger's close is adequately funded for aggregated costs to achieve synergies and effect full integration of networks and operations. The company's 364-day Secured Bridge Facility can be extended for an additional year under two 6-month extensions so long as no payment or bankruptcy event of default has occurred. Moody's expects T-Mobile will fully refinance any remaining outstandings under its Secured Bridge Facility as soon as practicable. Moody's expects T-Mobile would have very good liquidity supported by an undrawn $4 billion revolving credit facility and approximately $7.4 billion of cash. These strengths could be offset by a meaningful increase in business risk and a near term deterioration in operating free cash flow as the costs to achieve synergies are incurred well ahead of the benefits. Moody's believes that the process of integrating the two networks is the primary risk factor that could negate the potential benefits of the business combination. If the integration work results in a deterioration in service quality as T-Mobile migrates Sprint customers to the T-Mobile network, churn would increase and T-Mobile would suffer damage to its newly defined brand and reputation operating as a combined company. The combined effects of increased churn and lower share of gross adds could pressure T-Mobile's revenue and cash flow. If sustained, a negative subscriber trajectory would undermine the confidence of investors and present liquidity difficulties for the combined company, especially as it addresses debt maturities in later years. The US wireless industry is expected to be more resilient than many sectors as the spread of the coronavirus outbreak widens and the global economic outlook deteriorates. Moody's does not anticipate reduced wireless demand initially as a result of a weakening US economy. While telecom networks might become stressed from rising teleworking activity, Moody's notes that T-Mobile has deployed additional 600 MHz spectrum made available to it from several companies, including DISH Network Corporation (Dish, Ba3 rating under review for downgrade), that have allowed the company to remove smartphone data caps for all customers through mid-May initially. If economic conditions remain weak for an extended period of time T-Mobile could see lower or negative net subscriber additions growth due to its retail store closings, with some positive offset from digital sales and marketing efforts. Customer churn associated with missed service and device payments could ramp over time if any economic downturn is prolonged. Disruptions in supply chains could also impact device and network equipment sourcing, but this would not likely appear as a negative development until the second half of 2020. Moody's believes T-Mobile is more resilient to these unprecedented operating conditions and shifts in market sentiment that curtail credit availability than lower-rated issuers and more vulnerable industry sectors. Moody's will take rating actions as warranted to reflect the breadth and severity of the shock as it unfolds and potentially impacts T-Mobile's credit quality. Post-Merger, secured debt held at T-Mobile is guaranteed on a secured basis by all wholly-owned domestic restricted subsidiaries of T-Mobile and Sprint (subject to customary exceptions including for Sprint Spectrum special purpose vehicles), but the guarantees by Sprint, SCI and SCC are unsecured due to secured debt restrictions in the Sprint senior note documents. The Baa3 secured rating reflects Moody's expectation that funded secured debt will represent no greater than 50% of the total of funded secured debt plus unsecured debt of the combined company at the Merger's close or thereafter. Post-Merger, unsecured debt held at T-Mobile is guaranteed on an unsecured basis by all wholly-owned domestic restricted subsidiaries of T-Mobile and Sprint (subject to customary exceptions), but Sprint Spectrum special purpose vehicles are designated as restricted non-guarantors. T-Mobile US, T-Mobile and T-Mobile's and Sprint's wholly-owned domestic restricted subsidiaries (subject to customary exceptions) guarantee Sprint spectrum lease payments, out of which up to $3.5 billion is secured on a pari passu basis by the assets of the same entities whose assets are pledged to secure the secured debt held at T-Mobile. Sprint, SCI and SCC senior unsecured notes receive downstream unsecured guarantees from T-Mobile US and T-Mobile. The stable outlook reflects T-Mobile's market share gains and meaningful margin expansion, which will continue to benefit cash flow. The stable outlook also reflects Moody's expectations that T-Mobile will refinance all of its 364-day secured bridge loan facility as soon as practicable over the next 2-3 quarters. Factors that would lead to an upgrade or downgrade of the ratings: T-Mobile's rating could be upgraded if leverage is on track to fall below 4.0x and free cash flow were to improve to the high single digits percentage of total debt (all on a Moody's adjusted basis). Downward rating pressure could develop if T-Mobile's leverage is sustained above 4.5x and free cash flow deteriorates. This could occur if EBITDA margins come under sustained pressure or if future debt-funded spectrum purchases significantly exceed its expectations. In addition, a deterioration in liquidity such that the company was unable to fully address 12-18 months of total cash needs, including debt maturities, would pressure the rating downward. The revolving credit facility is subject to a maximum first lien secured net leverage ratio of 3.30x, tested quarterly. The first lien credit facility is expected to contain covenant flexibility for transactions that could adversely affect creditors, including incremental facility capacity up to the greater of $11 billion and 0.5x consolidated cash flow (to be determined definition), plus an unlimited amount subject to pro forma (x) first lien net leverage ratio = 2.0x, if pari passu secured, (y) secured net leverage ratio = 2.5x, if junior secured, or (z) total net leverage ratio = 6.0x, if unsecured (ratios limited to indebtedness for borrowed money, including indebtedness of any Spectrum special purpose vehicle, but excluding indebtedness in respect of tower securitizations, capital leases, purchase money debt, and other exceptions (to be determined definition). In addition, borrower may incur incremental debt to finance a permitted acquisition or investment so long as the leverage ratios do not increase. Up to the greater of $5 billion and 22.5% of consolidated cash flow of incremental or incremental equivalent debt may be incurred with an earlier maturity date than the term loan maturity date. Other flexible covenant provisions include: (a) the risk that guarantees may be released when a subsidiary ceases to be wholly owned, (b) collateral leakage is permitted through the transfer of assets to unrestricted subsidiaries; there are no additional "blocker" protections, and (c) step downs in the asset sale prepayment requirement to 75%, then 50% of net proceeds subject to achieving certain first lien net leverage ratios. The above are proposed terms and the final terms of the credit agreement can be materially different. TALEN ENERGY: S&P Downgrades ICR to 'B'; Outlook Negative --------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on U.S. power and energy supply company Talen Energy Supply LLC by one notch to 'B'. S&P also lowered its ratings on its senior secured debt to 'BB-' from 'BB'. The recovery rating remains '1'. S&P revised its recovery rating on senior unsecured debt to '6' from '5'; lowered its issue level ratings to 'CCC+' from 'B'. "Talen's credit measures have underperformed our expectations. When we revised our outlook on Talen to negative in the fall of 2018, we indicated the potential for a downgrade if the company could not reduce leverage to below 6.25x. Talen ended fiscal year 2019 with adjusted leverage greater than 8x, about 1.5x higher than expected. The impact of derivatives and non-operating cash flows is not reflected in this adjusted figure for 2019. We expect adjusted leverage to be 7.8x in 2020 and 6.8x in 2021, declining to about 6.0x in 2022 and beyond. Although Talen is significantly hedged for 2020, recessionary economic conditions that pressure power demand could lead to lower ratings if adjusted leverage remains above 7.5x in 2021 and beyond," S&P said. The negative outlook on Talen reflects the 1-in-3 chance for lower ratings, as lower economic growth could put downward pressure on power demand and result in materially lower energy margins than expected in 2021. S&P expects the company's metrics will remain elevated on persistently weak power prices and uncertainty around capacity prices in PJM. S&P expects leverage of about 7.8x in 2020 and about 6.8x in 2021, declining to 6.0x in 2022 and beyond. The rating agency also expects the company to maintain positive free cash flow and high availability under the revolving credit facility. "We would lower our ratings on Talen if the company's leverage remained above 7.5x on a sustained basis (2021 and beyond) in our forecasts, either due to diminished market conditions or more aggressive financial policies. Weaker market conditions could stem from a variety of factors, including lower-than-expected demand growth or greater-than-anticipated renewable penetration that weakens pricing for baseload generators. Additionally, any dividends to equity in the next couple of years could lead us to lower our ratings," S&P said. "We could revise our outlook on Talen to stable if the company continues to reduce its leverage to more sustainable levels such that we expect leverage to remain below 6.5x or less in all years," the rating agency said. TAPESTRY INC: Fitch Lowers LT IDR to BB, Outlook Negative --------------------------------------------------------- Fitch Ratings has downgraded Tapestry Inc.'s ratings, including its Long-Term Issuer Default Rating to 'BB' from 'BBB-' and unsecured debt to 'BB'/'RR4' from 'BBB-'. The Rating Outlook is Negative. The downgrade and Negative Outlook reflects the significant business interruption from the coronavirus and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around low-6.0x in fiscal 2020 (ending June 2020) from 3.3x in fiscal 2019 based on EBITDA declining to approximately $525 million from approximately $1.3 billion in fiscal 2019 on a nearly 25% sales decline to $4.7 billion. Adjusted leverage is expected to be around 4.0x in fiscal 2021, assuming sales declines of around 10% and EBITDA declines of around 25% in calendar 2021 from calendar 2019 levels. Leverage could return below 4.0x in fiscal 2022 assuming a sustained topline recovery. A more protracted or severe downturn could lead to further actions. Should Fitch's projections come to fruition, Tapestry has sufficient liquidity to manage operations through this downturn. The company ended calendar 2019 with $1.2 billion of cash and recently drew down $700 million of its $900 million unsecured revolver. The company's next maturity date is mid-2022, when $400 million of notes mature; the company's $900 million unsecured revolver matures in 2024. KEY RATING DRIVERS Coronavirus Pandemic: Fitch expects the impact on revenues for the global consumer discretionary sector from the coronavirus pandemic to be unprecedented as mandated or proactive temporary closures of retailer stores and restaurants in "non-essential" categories severely depresses sales. Numerous unknowns remain including the length of the outbreak; the timeframe for a full reopening of retail locations and the cadence at which it is achieved; and the economic conditions exiting the pandemic including unemployment and household income trends, the impact of government support of business and consumers, and the impact the crisis will have on consumer behavior. Fitch envisages a scenario where discretionary retailers (in the U.S.) are essentially closed through mid-May with sales expected to be down 80%-90% despite some sales shifting online, with a slow rate of improvement expected through the summer. Given an increased likelihood of a consumer downturn, discretionary sales could decline in the mid- to high-single digits through the holiday season. Fitch anticipates significant growth in 2021 against a weak 2020, but expects total 2021 sales could remain 8%-10% below 2019 levels. Given the typical timing of a consumer downturn (four to six quarters), revenue trends could accelerate somewhat exiting 2021, yielding 2022 as a growth year. Assuming this scenario, Fitch expects Tapestry's revenue to decline around 25% in calendar 2020 with EBITDA declines approaching 70%. In calendar 2021, Fitch expects revenue to decline around 10%, with EBITDA down around 25% over the two-year period. Given Tapestry's June fiscal year end, Fitch expects fiscal 2020 revenue and EBITDA could be down around 20% and 60%, respectively, with a rebound in fiscal 2021 such that revenue and EBITDA are down around 10% and 25% from fiscal 2019 levels, respectively. Tapestry has announced temporary store closures and has drawn $700 million of its $900 million unsecured credit facility. The company also suspended share repurchases and its dividend, which is around $375 million annually, beginning in its fourth fiscal quarter (ending June 2020). Fitch estimates that FCF could decline from around $125 million in fiscal 2019 to near-breakeven in fiscal 2020, as EBITDA declines are somewhat mitigated by lower cash taxes; Fitch also assumes some proactive capex reductions. Kate Spade's Topline Challenges The Kate Spade brand has experienced topline dislocation since its acquisition by Tapestry for $2.4 billion, or 9x EBITDA, in July 2017. Comps have averaged -7% for the eight quarters subsequent to acquisition close, weakening to -16% in the quarter ending September 2019, but showing sequential improvement increasing to -4% in the quarter ending December 2019. Fitch expects topline weakness is the result of a combination of incumbent brand challenges and Tapestry's efforts to reposition the brand. Kate Spade's brand showed signs of maturation ahead of its acquisition by Tapestry. Prior to 2016, the Kate Spade brand saw five years of double-digit positive comps growth - driving a nearly 40% revenue CAGR over the period - as the brand successfully introduced new styles, entered new categories, and increased its popularity amongst consumers. However, comps in 2016 softened meaningfully to the mid-single digits and were modestly negative in early 2017, just prior to the company's sale. While management has pointed to reduced promotional activity and weak North American traffic, some softening could be due to maturation given the brand's rapid rise prior to its acquisition. Following its acquisition, Tapestry undertook a brand repositioning strategy at Kate Spade, which in many ways mirrors efforts employed at the Coach brand in recent years. Elements of the strategy include reducing Kate Spade's promotional flash sales and pulling back on wholesale sell-in, introducing new collections (from new creative director Nicola Glass) with upgraded product quality and building out the brand's presence in the international segment, particularly Greater China, Europe, Australia, Malaysia and Singapore. The brand's topline has modestly declined from pre-acquisition levels of $1.4 billion despite nearly 50% net store count expansion to around 400 units. Similarly, Kate Spade's EBITDA has remained close to pre-acquisition levels of $264 million despite the achievement of around $100 million to $115 million in cost synergies. At the time of the acquisition, Fitch expected Tapestry's EBITDA could expand to around $1.6 billion within 24 to 36 months from pro forma levels around $1.4 billion, based on growth at Coach and Kate Spade as well as synergy realization. In fiscal 2019, EBITDA was $1.3 billion and Fitch expected fiscal 2020 could produce similar levels EBITDA prior to the coronavirus pandemic. Coach Brand Stabilized Following several years of sales and EBITDA declines, the Coach brand is demonstrating stabilized operations. Given concerns around reliance on promotionally-driven revenue and sales of lower-priced products, the company's underlying strategy was to reposition the brand further upscale, thus increasing the brand's average price point and penetration of full-price sales. Over the past five or so years, the company has undertaken a number of actions, particularly in North America, to position the brand for long term growth. These actions have included evolving the product mix with a view toward an innovative, design-led and editorial offering, closing stores and remodelling much of its footprint, restructuring its promotional cadence by reducing the amount of periodic sale events, and refocusing its marketing efforts away from price point and event messaging to a product-focused platform across e-mail, social media, and fashion industry activity. While this strategy initially caused multi-year declines in EBITDA as Coach sales declined from peak of $5.1 billion in fiscal 2013 to $4.2 billion in fiscal 2015, topline began to stabilize in fiscal 2016 as the company's efforts gained traction with customers. Brand comps grew 1.5% in 2018 and 1.9% in 2019, and Fitch previously expected comps to grow in the low single digits annually over the next two to three years. Coach topline trajectory is expected to be similar to the comp level as the company does not expect to grow its footprint meaningfully. Coach brand EBITDA has stabilized in the $1.2 billion to $1.3 billion range over the last three years commensurate with sales stabilization. Leading Position in Competitive Industry With its Coach ($4.3 billion revenue) and Kate Spade ($1.4 billion revenue) brands, Tapestry is one of the largest global handbag and accessory players. Coach is essentially tied with Michael Kors (owned by Capri Holdings Limited, BB+/Negative) for #1 market share in the U.S. handbag market. Tapestry's scale relative to smaller, less cash-generative competitors provides key benefits, including a greater ability to invest in revenue-driving activities like design, merchandise, and marketing. The global accessories industry is highly competitive, and brands must remain relevant in the face of changing consumer tastes. Successful product introductions, effective brand-relevant marketing, and good pricing strategies can drive consistent brand growth. However, external factors such as changing fashion trends and competitor actions - including irrational pricing - can impact growth trajectories longer term. While Coach merchandising has fashion-conscious elements, the bulk of its assortment is focused on classic looks and quality craftsmanship, which limits fashion risk to some degree. Fitch expects the more fashion-forward Kate Spade brand is more susceptible to changing fashion whims over time. Good Cash Flow Tapestry's scale and strong EBITDA margins above 20% have allowed it to generate substantial cash flow, despite some operational challenges in recent years. Tapestry's cash flow generation has permitted ample re-investment into business initiatives, with capital intensity sustained around 5% and with FCF (after dividends) margins averaging 4% the past three fiscal years. Fitch now expects near-breakeven FCF in fiscal 2020, with FCF improving to the $200 million to $300 million range in fiscal 2021, largely due to the suspension of Tapestry's dividend ($0.3375 per share or around $375 million annually), which Fitch assumes lasts for one year. Assuming an EBITDA rebound and the resumption of Tapestry's dividend, FCF could return to the $200 million range in fiscal 2022. DERIVATION SUMMARY Tapestry's downgrade to 'BB' and Negative Outlook reflect the significant business interruption from the coronavirus and the implications of a downturn in global discretionary spending that Fitch expects could extend well into 2021. Fitch anticipates a sharp increase in adjusted leverage to around low-6.0x in fiscal 2020 (ending June 2020) from 3.3x in fiscal 2019 based on EBITDA declining to approximately $525 million from approximately $1.3 billion in fiscal 2019 on a nearly 25% sales decline to $4.7 billion. Adjusted leverage is expected to be around 4.0x in fiscal 2021, assuming sales declines of around 10% and EBITDA declines of around 25% in calendar 2021 from calendar 2019 levels. Leverage could return below 4.0x in fiscal 2022 assuming a sustained topline recovery. The ratings continue to reflect Tapestry's strong brand positioning at Coach, which generates approximately 80% of Tapestry's segment EBITDA, and its leading market share within the U.S. premium handbag and small leather goods market. The Coach brand has demonstrated sales and EBITDA stabilization in recent years following efforts to emphasize product quality and style while reducing promotional activity. The strong market share is offset by Tapestry's exposure to fashion and brand risk, where design missteps or decreased brand affinity can materially impact operations. This risk is demonstrated by Tapestry's protracted efforts to turnaround the Kate Spade brand following its 2017 acquisition. Similarly rated apparel and accessories peers include Burlington Stores, Inc. (BB+/Negative), Capri Holdings Limited (BB+/Negative) and Levi Strauss & Co. (BB/Negative). Burlington's rating reflects good growth trajectory in both top line and EBITDA given a favorable backdrop of growth in the off-price channel and strong execution. Ratings for Capri reflect its strong U.S. positioning and global presence in the handbag and leather goods categories, while Levi's ratings reflect its strong global denim positioning. Like Tapestry, operations for Capri and Levi are dominated by a single brand, which somewhat limits diversification and heightens fashion risk. Both Tapestry and Capri have made leveraging acquisitions in recent years with somewhat disappointing subsequent performance, on a difficult turnaround for Tapestry's acquired Kate Spade brand and ongoing sluggishness for Capri's Michael Kors brand. Ratings and Negative Outlooks for each of these players reflect projected consumer discretionary spending concerns through 2021 triggered by the coronavirus pandemic. By the end of 2021, adjusted debt/EBITDAR could trend around 4.0x for Burlington and Levi, and, assuming some debt reduction, around the mid-3x range for Capri. KEY ASSUMPTIONS Here are Fitch's projections prior to disruption related to the coronavirus: -- Fitch projected modestly positive growth beginning fiscal 2020, largely due to comparable store sales growth. Revenue was projected to expand to $6.3 billion in fiscal 2022 from $6.0 billion in fiscal 2019. -- EBITDA growth was forecast to generally follow revenue, with expansion from approximately $1.3 billion in fiscal 2019 toward $1.35 billion in fiscal 2022; margins were expected to remain near the 21.5% recorded in fiscal 2019. -- FCF was projected to average around $400 million annually, and could have been used for share buybacks. Adjusted debt/EBITDAR, which was 3.3x in fiscal 2019, was expected to trend near this level over the medium term given EBITDA growth mitigated by rising rent expense. Here are Fitch's revised projections reflecting the significant business interruption from the coronavirus and the ramifications for a likely downturn in discretionary spending extending well into 2021: -- Fitch projects Tapestry's fiscal 2020 (ending June 2020) revenue could decline up to 25% to around $4.7 billion and EBITDA could decline up to 60% to around $525 million, assuming store closures through mid-May and a slow recovery in customer traffic for the remainder of the year. Weak sales are expected to continue in the first half of Tapestry's fiscal 2021, with a significant reversal in the second half. As Tapestry performance recovers in fiscal 2022, Fitch expects full year revenue of approximately $5.6 billion and EBITDA of around $1.1 billion to be approximately 6% and 13% below fiscal 2019 levels. Calendar 2021 results could show revenue and EBITDA down 10% and 25%, respectively, from calendar 2019. Fitch's revenue expectations reflect its views that global retail discretionary spending will decline around 40% in 1H calendar 2020, decline mid- to high- single digits in 2H 2020, and sales in calendar 2021 will be down 8% to 10% from 2019 levels. -- Beginning 2022, Tapestry could resume low-single digit topline and EBITDA growth. -- FCF in fiscal 2020 could be near breakeven from around positive $125 million in fiscal 2019, largely due to a nearly $800 million reduction in EBITDA, mitigated by lower cash taxes, working capital benefits, reduced cash restructuring and lower dividend payments. FCF in fiscal 2021 could improve toward $300 million, benefitting from EBITDA growth and lower dividends, which Fitch assumes could resume in Tapestry's fiscal fourth quarter 2021. Tapestry could resume deployment of FCF toward share repurchases as operations stabilize. The company has no maturities until 2022, $400 million of notes mature. -- Adjusted debt/EBITDAR, which was 3.3x in fiscal 2019, could climb to around 6.3x in fiscal 2020 and decline to around 4.0x in fiscal 2021 on EBITDA swings. Adjusted debt/EBITDAR in fiscal 2020 is impacted by around 0.5x from Tapestry's decision to draw $700 million on its revolver; Fitch expects this to be repaid in fiscal 2021. -- Tapestry ended calendar 2019 with $1.2 billion of cash and investments and recently drew down $700 million on its $900 million unsecured revolver. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action A positive rating action could result from EBITDA growth toward $1.2 billion, which would yield total adjusted debt/EBITDAR (capitalizing rent at 8x) sustaining in the high-3x range. Fitch could stabilize Tapestry's Outlook if confidence improved in the company's ability to stabilize EBITDA around $1 billion, such that adjusted debt/EBITDAR sustained in the low-4x range. Developments That May, Individually or Collectively, Lead to Negative Rating Action A negative rating action could result from an ongoing weak operating trends, yielding EBITDA sustained in the $900 million range and consequently adjusted debt/EBITDAR (capitalizing rent at 8x) sustained above the low-4x range. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE As of Dec. 28, 2019, Tapestry had ample liquidity, with approximately $1.17 billion in cash and short-term investments and no borrowings on its $900 million unsecured revolver maturing October 2024. The company's debt includes three tranches of unsecured notes totalling $1.6 billion including a $400 million tranche maturing in 2022 and two tranches of $600 million maturing in 2025 and 2027. On March 26, 2020, the company announced that they had borrowed $700 million on their $900 million revolver. Additionally, they announced that they would be suspending their regular quarterly dividend and suspending their share repurchase program. Fitch would expect Tapestry to repay the $700 million revolver draw in fiscal 2021, given Fitch's current operating assumptions. RECOVERY CONSIDERATIONS Fitch does not employ a waterfall recovery analysis for issuers assigned ratings in the 'BB' category. The further up the speculative grade continuum a rating moves, the more compressed the notching between the specific classes of issuances becomes. Fitch assigned a 'BB/RR4' to Tapestry's senior unsecured revolving credit facility and unsecured notes, indicating average recovery prospects (31% to 50%). SUMMARY OF FINANCIAL ADJUSTMENTS Historical and projected EBITDA is adjusted to add back non-cash stock based compensation and exclude restructuring charges. Fitch has adjusted the historical and projected debt by adding 8x annual gross rent expense. TARWATER REAL ESTATE: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Debtor: Tarwater Real Estate Holdings, LLC d/b/a Buzzy's Grille, Inc. 4165 McEver Park Dr. Acworth, GA 30101 Business Description: Tarwater Real Estate Holdings, LLC is a privately held company in the restaurants industry. Chapter 11 Petition Date: April 2, 2020 Court: United States Bankruptcy Court Northern District of Georgia Case No.: 20-65242 Judge: Hon. Sage M. Sigler Debtor's Counsel: Michael Familetti, Esq. 142 S. Park Square Marietta, GA 30060 Tel: 770-794-8005 Estimated Assets: $1 million to $10 million Estimated Liabilities: $500,000 to $1 million The petition was signed by William Tarwater, owner. The Debtor failed to include in the petition a list of its 20 largest unsecured creditors at the time of the filing. A copy of the petition is available for free at PacerMonitor.com at: https://is.gd/XJBC44 TECNOGLASS INC: Moody's Places Ba3 CFR on Review for Downgrade -------------------------------------------------------------- Moody's Investors Service has placed Tecnoglass Inc.'s Ba3 corporate family rating and the senior unsecured rating on its 2022 notes on review for downgrade. Prior to this rating action, Tecnoglass rating outlook was stable. The action follows out expectation of weaker than anticipated operating performance and challenging business prospects through at least 2021. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Business conditions and revenue-growth potential are deteriorating rapidly for construction companies globally. The spread of the coronavirus and the associated quarantines, social distancing measures, travel restrictions and logistics disruptions have led to suspensions and delays in construction activity. Its action reflects the impact on Tecnoglass of the breadth and severity of the shock, and the potential broad credit quality deterioration it has triggered. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The review for downgrade was prompted by its consideration that Tecnolgass is at substantial risk of a rapid deterioration on its operational and liquidity profile in the context of the Coronavirus outbreak given its exposure to the US residential and commercial construction market and geographic concentration of its production facilities in Colombia. During the review, Moody's will focus on Tecnoglass' ability to refinance its 2022 notes, considering tightening capital markets conditions. Moody's will also use the period to analyze the evolution of the coronavirus outbreak in Colombia and the US and its effects on Tecnoglass' profitability and cash generation. Currently, the US account for 85% of Tecnoglass revenues and 90% of backlog. In the US, construction activity has been suspended in a few cities and slowed in others. At the same time, projects are being delayed because of economic weakness. In terms of production, the bulk of Tecnoglass manufacturing capabilities are highly concentrated in Barranquilla, Colombia. Since 26 March, Colombia declared a 19-day national lockdown to stop the spread of coronavirus. Neither measure has affected Tecnoglass operations, as projects in its pipeline and production continue without disruption. Still, until the contagion is contained in both countries, Tecnoglass is exposed to the risk of major disruptions. During 2019, the company's operating performance improved, providing better prospects for recovery once the crisis is over. The company's revenues were $431 million, 16.1% higher than in 2018 and resulting in a 18.6% CAGR since 2012. Also, Tecnoglass' EBITA margin, including its standard adjustments, was 15.0%; adequate for the Ba3 rating and higher compared with the 14.3% EBITA margin as of year-end 2018. This improvement reflects lower operating leverage, resulting from higher revenues. Prior to the coronavirus outbreak, Moody's were anticipating further margin expansion in 2020. Capacity utilization is still low (between 56% and 89%, depending on the specific part of the process), resulting in further opportunities to achieve economies of scale as revenue grows. But the effect of the disruptions on Tecnoglass' credit quality now depends on how much revenue it loose amid potential construction halts and delays, how quickly they are resumed and the degree to which its access to funding is hurt. Strong order backlogs will provide some revenue support once construction activity is fully restored. Tecnoglass backlog is now 5.3% higher when compared to the end of 2018. Economic stimulus measures, also have the potential to limit revenue declines. Tecnoglass' liquidity is tempered by refinancing risk as its $210 million senior notes are due in January 2022. To maintain adequate liquidity, the company will need to refinance before the end of 2020 under increasingly volatile conditions in the capital markets. Considering cash balance as of the end of 2019 of $48 million and some $20 million available under committed lines, Tecnoglass should be able to cover fixed costs, taxes and interests during a temporary stoppage. However, any indication that the effect will take longer than a couple of months will pressure liqudity significantly. Some measures the company could take under a more stressed scenario include to invoke the force majeure provision under its take or pay contracts should a mandatory stoppage occurs. Also, although not a base case, the company could have headcount reduction amid a more challenging environment. Other measures to preserve cash could include a closer management of working capital and to refrain to declare dividends and extraordinary capex. The company could also draw funds from uncommitted outstanding lines as a liquidity cushion. The ratings are unlikely to be upgraded in the short term. Positive rating pressure would not arise until the coronavirus outbreak is brought under control, construction activity is fully restored in the US and lockdowns in Colombia are over. At this point Moody's would evaluate the balance sheet and liquidity strength of the company and positive rating pressure would require evidence that the company is capable of substantially recovering its financial metrics and restoring liquidity headroom within a 1-2 year time horizon. Ratings could be downgraded if there is no indication of an ongoing plan to refinance the 2022 global notes by mid-2020. A downgrade will also arise as an indication of a significant cash burn that threatens Tecnoglass' ability to cover corporate expenses such as interests, taxes and working capital with internal sources. Tecnoglass Inc. is a Colombian company engaged in the production of high-specification architectural glass and windows for both commercial and residential markets in the US and Colombia. The company operates a 2.7 million square foot (sq ft) plant located in Barranquilla, Colombia. In 2019, about 86% of the company's revenue was generated in the US, 12% in Colombia and 2% in Panama and other countries in Latin America. The company was established in 1984 and has been listed on the Nasdaq since 2013 and the Colombian Stock Exchange since January 2016. The company's market capitalization as of January 2019 was $359 million. TENET HEALTHCARE: Fitch Affirms 'B' IDR & Alters Outlook to Stable ------------------------------------------------------------------ Fitch has affirmed Tenet Healthcare Corp.'s Issuer Default Rating at 'B' and revised the Outlook to Stable from Positive. The ratings apply to approximately $14.6 billion of debt as of Dec. 31, 2019. The revision in the Outlook reflects Fitch's expectation that Tenet will reduce leverage more slowly than anticipated at the time of the prior rating review, due to the effects of the coronavirus pandemic on revenues, EBITDA and cash generation during 2020. KEY RATING DRIVERS Coronavirus Pandemic Affecting Operations: Fitch believes that U.S. Healthcare & Pharmaceutical companies, including providers of healthcare services, should be less effected by the coronavirus and its influence on U.S. consumers' behavior than other corporate sectors as demand is less economically sensitive and often times is not discretionary. However, Fitch notes that while the influence on healthcare service providers, including Tenet, is expected to be relatively muted compared with more discretionary sectors, depressed volumes of elective patient procedures will weigh on revenue and cash flow beginning in second-quarter 2020. Healthcare providers are cancelling elective procedures in both inpatient and outpatient settings in order to increase capacity for coronavirus patients. Fitch currently believes Tenet has sufficient headroom in the 'B' rating to absorb these effects, which is predicated on an assumption that the healthcare services sector will experience a strong recovery in elective patient volumes beginning in later 2020 and into 2021. However, there could be downward pressure on the rating if the outbreak is of longer duration and depresses cash flow in 2020 more than currently anticipated or the healthcare services segment proves to be more economically sensitive than during past U.S. economic recessions, leading to a slower recovery in elective patient volumes and pricing in 2021. Fitch notes that the health insurance expansion provisions of the Affordable Care Act, which were not in place during the Great Recession of 2008-2009, support the expectation of a good recovery in elective volumes in 2021 since unemployed Americans will have relatively better access to health insurance than during the Great Recession. Securing Additional Liquidity: Fitch believes Tenet's debt agreements give the company the flexibility to issue secured debt to support liquidity during the operational disruption expected during the coronavirus pandemic. Tenet's sources of committed external liquidity include a $1.5 billion asset based lending (ABL) facility with the borrowing base allowed full availability as of YE 2019. The company's debt agreements allow for incremental secured debt issuance of up to 4.0x EBITDA, which Fitch estimates allows about $1 billion of additional secured debt capacity based on YE 2019 EBITDA. Liquidity during the coronavirus pandemic will also be supported by funding provided to healthcare providers under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Among other provisions, the CARES Act will allow hospitals to request accelerated payment of up to one half of annual Medicare fees for service revenues, to be repaid beginning four months after the payment is received. Based on Tenet's 2019 hospital net patient revenues Fitch believes the company could potentially request up to $1.3 billion of accelerated Medicare payments. Other potential sources of liquidity include asset sales. Tenet's two Memphis area hospitals are currently under definitive agreement for sale, which could net about $350 million of proceeds later in 2020. Fitch does not include the divestiture in its rating case forecast for the issuer. Expect Leverage to Spike in 2020: Because of a reduction in EBITDA during the course of the coronavirus pandemic and assuming the need for additional liquidity to cover operating expenses, Fitch expects Tenet's total debt/EBITDA to spike to 8.8x at YE 2020, compared with YE 2019 Fitch calculated leverage of 6.3x. Fitch currently anticipates leverage to drop fairly rapidly back to a level considered consistent with Tenet's 'B' rating, declining to 6.8x at YE 2021 due to recovery of EBITDA and debt repayment. DERIVATION SUMMARY Tenet's 'B' Long-Term IDR reflects the company's highly leveraged balance sheet, largely as a result of debt funded acquisitions. Tenet's leverage is higher than that of the closest hospital industry peers: HCA Healthcare Inc. (HCA; BB/Stable) and Universal Health Services Inc. (UHS; BB+/Stable). Tenet's operating and FCF margins also lag these industry peers; however, Tenet has recently made progress in closing the gap through cost-cutting measures and the divestiture of lower margin hospitals. Tenet has a stronger operating profile than lower-rated peers Community Health Systems (CHS; CCC) and Quorum Healthcare Corp. Similar to HCA and UHS, Tenet's operations are primarily located in urban or large suburban markets that have relatively favorable organic growth prospects. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer Include: - Fitch currently anticipates a 20% drop in Tenet's 2020 EBITDA compared with 2019 due to the operational effects of the coronavirus pandemic. - 2021 EBITDA is expected to be 22% higher than the 2020 level. These estimates are highly sensitive to the depth and duration of the coronavirus pandemic in Tenet's markets. - The 2020 EBITDA estimate assumes a 25% decline in volumes in the ambulatory care segment and a 5% decline in volumes in the hospital operations segment. It assumes the 2020 operating EBITDA margin compresses 230bps to a Fitch- calculated 11.1% from the 2019 level of 13.4%. - Leverage spikes to 8.8x at YE 2020 before dropping below 7.0x during 2021. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action: - An expectation of debt/EBITDA after associate and minority dividends sustained below 5.5x; - An expectation for FCF margin sustained above 2%. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: - Debt/EBITDA after associate and minority dividends sustained above 7.0x at YE 2021; - An expectation for consistently break-even to negative FCF margin; The negative rating sensitives could be tripped if the coronavirus pandemic has a greater impact on cash flow than Fitch currently anticipates or Tenet recovers lost revenue and EBITDA more slowly than expected beginning in later 2020 and into 2021. There is still a high degree of uncertainty about the pace of acceleration of coronavirus cases along with the ultimate level of coronavirus patient volumes in Tenet's markets and these factors will be important to the trajectory of 2020 revenue and EBITDA. BEST/WORST CASE RATING SCENARIO Ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Pre-Coronavirus Outbreak Liquidity Profile Solid: Tenet's sources of liquidity included $262 million of cash on hand and an undrawn $1.5 billion ABL facility as of YE 2019. The ABL matures in September 2024. Tenet's debt agreements do not include financial maintenance covenants aside from a 1.5x fixed-charge coverage ratio test in the bank agreement that is only in effect during a liquidity event, defined as whenever available ABL capacity is less than $100 million. LTM Dec 31, 2019 EBITDA/interest paid equaled 2.5x. The next significant debt maturities are $2.8 billion of unsecured notes maturing in April 2022 and $1.9 billion of unsecured notes maturing in June 2023. The company produced $171 million of FCF during 2019, before the effects of the coronavirus pandemic were affecting the operating profile. Fitch expects the company to burn cash in 2020, with FCF of negative $400 million-$500 million, before the level largely recovers in 2021. Debt Notching Considerations: The 'BB'/'RR1' and 'BB-'/'RR2' ratings for Tenet's ABL facility and the senior secured first-lien notes reflect Fitch's expectation of recovery for the ABL facility in the 91% to 100% range and recovery for the first-lien secured notes in the 71% to 90% range under a bankruptcy scenario. The 'B'/'RR4' rating on the senior secured second-lien notes and senior unsecured notes reflect Fitch's expectations of recovery of outstanding principal in the 31% to 50% range. The debt issue ratings are sensitive to the amount of secured debt in the capital structure. If Tenet were to issue the full $1 billion of additional secured debt that Fitch estimates is the capacity under the debt agreement incurrence covenants, it would likely result in a one-notch downgrade of the senior secured first-lien notes rating to 'B+'/'RR3'. Fitch estimates an enterprise value (EV) on a going-concern basis of $9 billion for Tenet, after a deduction of 10% for administrative claims. The EV assumption is based on post reorganization EBITDA after dividends to associates and minorities of $1.4 billion and a 7.0x multiple. To date, Fitch does not believe that the coronavirus pandemic has changed the longer-term valuation prospects for the hospital industry and Tenet's going-concern EBITDA and multiple assumptions are unchanged from the last ratings review. The post-reorganization EBITDA estimate is approximately 28% lower than Fitch's 2020 forecast EBITDA for Tenet and considers the attributes of the acute care hospital sector and includes the following: a high proportion of revenue (30%-40%) generated by government payors, exposing hospital companies to unforeseen regulatory changes; the legal obligation of hospital providers to treat uninsured patients, resulting in a high financial burden for uncompensated care, and the highly regulated nature of the hospital industry. There is a dearth of bankruptcy history in the acute care hospital segment. In lieu of data on bankruptcy emergence multiples in the sector, the 7.0x multiple employed for Tenet reflects a history of acquisition multiples for large acute care hospital companies with similar business profiles as Tenet in the range of 7.0x-10.0x since 2006 and trading multiples (EV/EBITDA) of Tenet's peer group (HCA, UHS, and CHS), which have fluctuated between approximately 6.5x and 9.5x since 2011. Based on the definitions of Tenet's secured debt agreements, Fitch believes that the group of hospital operating subsidiaries that guarantee the secured debt excludes any non-wholly owned and non-domestic subsidiaries, and therefore, does not encompass part of the value of the Conifer and ambulatory care segments. The hospital operations segment contributes about 55% of consolidated EBITDA, and Fitch uses this value as a proxy to determine the rough value of the secured debt collateral of $4.8 billion. Fitch assumes this amount is completely consumed by the ABL facility and the first-lien lenders, leaving $4.2 billion of residual value to be distributed on a pro rata basis to the remaining $2.8 billion of first-lien claims and the second-lien secured and unsecured claims. The ABL facility is assumed to be fully recovered before the other secured debt in the capital structure. The ABL facility is secured by a first-priority lien on the patient accounts receivable of all the borrower's wholly owned hospital subsidiaries, while the first- and second-lien secured notes are secured by the capital stock of the operating subsidiaries, making the notes structurally subordinate to the ABL facility with respect to the accounts receivable collateral. Fitch assumes that Tenet would draw the full amount available on ABL facility in a bankruptcy scenario, and includes that amount in the claims waterfall. TEVOORTWIS DAIRY: May 6 Plan & Disclosure Hearing Set ----------------------------------------------------- Debtor TeVoortwis Dairy, LLC, filed with the U.S. Bankruptcy Court for the Eastern District of Michigan, Northern Division - Bay City, a combined plan and disclosure statement. On March 19, 2020, Judge Daniel S. Opperman approved the disclosure statement and established the following dates and deadlines: * April 29, 2020, is the deadline to return ballots on the plan, as well as to file objections to final approval of the disclosure statement and objections to confirmation of the plan. * May 6, 2020, at 1:30 p.m. in the U.S. Bankruptcy Courtroom, 111 First Street, Bay City, Michigan 48708 is the hearing on objections to final approval of the disclosure statement and confirmation of the plan. * May 20, 2020, is the deadline for all professionals to file final fee applications. A full-text copy of the order dated March 19, 2020, is available at https://tinyurl.com/symyxgq from PacerMonitor at no charge. About Tevoortwis Dairy TeVoortwis Dairy, LLC, is a privately held company in Bad Axe, Mich., that operates in the dairy farming industry. TeVoortwis Dairy sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Mich. Case No. 19-21104) on May 24, 2019. At the time of the filing, the Debtor disclosed assets of between $10 million and $50 million and liabilities of the same range. The case is assigned to Judge Daniel S. Opperman. Keith A. Schofner, Esq., at Lambert Leser, is the Debtor's bankruptcy counsel. The Office of the U.S. Trustee on June 24, 2019, appointed three creditors to serve on an official committee of unsecured creditors in the Chapter 11 case. The Committee retained Winegarden Haley Lindholm Tucker & Himelhoch, P.L.C., as counsel. TEVOORTWIS DAIRY: Unsecureds Owed $2M Get $50K Annually for 5 Years ------------------------------------------------------------------- Te Voortwis Dairy, LLC and Te Voortwis Land Company, LLC, proposed a Plan of Reorganization that provides that the Debtor will continue operations and pay creditors from the operating income of the reorganized Debtor. The Class 3 GreenStone ACA Secured Claim in the amount of $6,000,000 will be amortized over a period of 120 months and will accrue interest at the rate of 7.35% per annum, commencing on July l, 2020, and continuing on the 1st day of each month thereafter until June 15 2021, the Debtor will pay GreenStone ACA interest only payments of approximately $36,750 per month. The Class 12 GreenStone FLCA Secured Claim in the amount of $14,000,000 will be amortized over a period of 120 months and will accrue interest at the rate of 7.35%. Commencing on the July 1, 2020, and continuing on the1st day of each month thereafter until June 1, 2021, the Debtor will pay GreenStone FCLA interest only payments of approximately $85,750 per month. Commencing on July 1, 2021 and continuing the first day of each month thereafter, until June 1, 2025, the Debtor will pay GreenStone FCLA principal and interest payments of approximately $102,097 per month. Then commencing July 1, 2025, in the event that a GreenStone Default as not been declared or a GreenStone Default has been declared and is cured in the applicable cure period or the cure period has been extended or the default waived, the Debor shall continue to pay monthly principal and interest payments to GreenSTone FCLA in the amount of $102,097 per month until June 30, 2027. Class 14 General Unsecured Claims consists of all General Unsecured Claims that are allowed claims, and the combined portion of the GreenStone ACA and GreenSTone FLCA claims that exceeded the combined total of $20,000,000. The Plan Proponents estimate that Class 14 Claims will total approximately $2,000,000. On or before Dec. 31 of each year, beginning the calendar year that the Effective Date occurs and continuing on or before 31st day of December thereafter for four additional years the Debtor will pay $50,000 per year, for a period of 5 consecutive years into the trust account of Lambert Leser for benefit of the Class 14 Creditors. The funding of the Plan, including the cash distributions to be made pursuant to the Plan be derived from (i) Cash held by the Debtor on the Effective Date; (ii) any funds received by the Debtor; (iii) earnings from the Debtor’s business; and, if necessary, (iv) funds provided by the post-petition lender and (v) funds provided by insiders. A full-text copy of the Joint Combined Plan of Reorganization and Disclosure Statement dated March 16, 2020, is available at https://tinyurl.com/tx4yxo4 and https://tinyurl.com/u8y63yd from PacerMonitor.com at no charge. Attorneys for Te Voortwis Dairy: Lambert Leser 755 W. Big Beaver Road, Suite 410 Troy, Michigan 48084 Telephone Number: 248-251-1001 Keith A. Schofner E-mail: kschofner@lambertleser.com Attorneys for Te Voortwis Land Company: Wolfson Bolton PLLC Anthony J. Kochis 3150 Livernois Suite 275 Troy, Michigan 48083 Tel: 248-247-7105 E-mail: akochis@wolfsonbolton.com About Tevoortwis Dairy TeVoortwis Dairy, LLC, is a privately held company in Bad Axe, Mich., that operates in the dairy farming industry. TeVoortwis Dairy sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Mich. Case No. 19-21104) on May 24, 2019. At the time of the filing, the Debtor disclosed assets of between $10 million and $50 million and liabilities of the same range. The case is assigned to Judge Daniel S. Opperman. Keith A. Schofner, Esq., at Lambert Leser, is the Debtor's bankruptcy counsel. The Office of the U.S. Trustee on June 24, 2019, appointed three creditors to serve on an official committee of unsecured creditors in the Chapter 11 case. The Committee retained Winegarden Haley Lindholm Tucker & Himelhoch, P.L.C., as counsel. TNT UNDERGROUND: May 5 Hearing on Disclosure Statement ------------------------------------------------------ The hearing to consider the approval of the disclosure statement filed by TNT Underground Utilities, Inc. will be held at the U.S. Bankruptcy Court for the Southern District of Mississippi, Thad Cochran United States Courthouse, Bankruptcy Courtroom 4C, 501 East Court Street, Jackson, Mississippi, on May 5, 2020 at 10:00 A.M. April 20, 2020 is fixed as the last day for filing and serving written objections to the disclosure statement. About TNT Underground Utilities TNT Underground Utilities, Inc., a power line and telecommunications infrastructure construction contractor, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Miss. Case No. 19-02966) on Aug. 19, 2019. At the time of the filing, the Debtor was estimated to have assets of between $500,000 and $1 million and liabilities of between $1 million and $10 million. The case is assigned to Judge Neil P. Olack. Eileen Shaffer, Esq., an attorney based in Jackson, Miss., is serving as counsel to the Debtor. TRANSDIGM INC: Moody's Places B1 CFR on Review for Downgrade ------------------------------------------------------------ Moody's Investors Service placed its ratings for TransDigm, Inc. on review for downgrade. "The review for downgrade reflects Moody's expectation that the coronavirus will have a significant adverse impact on commercial aerospace traffic volumes for at least the balance of 2020," says Eoin Roche, Moody's lead analyst for TransDigm. TransDigm's heavy exposure to commercial aerospace is likely to make the company highly vulnerable to a slowdown. As such, Moody's anticipates meaningful sales and earnings headwinds over the next few quarters, and a weakening of TransDigm's key credit metrics. "The pending earnings pressures from the coronavirus are likely to be particularly pronounced in TransDigm's high-margin commercial aftermarket business and will coincide with an already highly leveraged balance sheet, with Moody's-adjusted debt-to-EBITDA of about 7.3x as of December 2019, limiting near-term financial flexibility," according to Roche. RATINGS RATIONALE The B1 corporate family rating balances an aggressive financial policy, considerable tolerance for risk and elevated financial leverage against TransDigm's strong competitive standing, supported by the proprietary and sole-sourced nature of the majority of its products. TransDigm pursues an aggressive financial policy that seeks private equity-like returns with a focus on shareholder-friendly initiatives that entail cash distributions as a key priority. Leverage remains highly elevated and the company's commercial OEM and commercial aftermarkets seem likely to face a much more difficult operating environment over the next few quarters. Moody's does not expect the ongoing grounding of the 737 MAX program to have a material adverse impact on TransDigm's financial profile. The rapid and widening spread of the coronavirus outbreak, the deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The aerospace sector has been adversely affected by the shock given its indirect sensitivity via the airline industry to consumer demand and market sentiment. More specifically, the weaknesses in TransDigm's credit profile, including its exposure to commercial aerospace, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its actions reflect the impact on TransDigm of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Moody's review will primarily consider: (1) the likely degree and duration of the financial impact of the coronavirus on TransDigm's commercial aftermarket and OEM businesses, including its forward revenue, earnings and cash flow profile; (2) TransDigm's ability to reduce its cost structure in the face of what are likely to be meaningfully lower volumes over the balance of 2020; (3) the company's liquidity profile, including anticipated cash balances, future free cash generation, the sufficiency of external sources of financing if needed, and the likelihood of compliance with financial covenants; and (4) TransDigm's aggressive financial policies by which the company is governed, and the likely allocation of capital that it will pursue over the next few quarters. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade include debt-to-EBITDA sustained below 5x on a Moody's-adjusted basis, coupled with maintenance of the company's industry leading margins and continuation of a strong liquidity profile. Factors that could lead to a downgrade include Moody's-adjusted debt-to-EBITDA remaining in the high-7x range, or an inability or an unwillingness to reduce financial leverage back towards 7x; an inability to continue to make regular price increases or expectations of pricing pressure from aftermarket customers such that EBITDA margins are expected to remain around 40%; or a deteriorating liquidity profile involving FCF-to-Debt (excluding dividends) continuously below 5%, annual cash flow from operations sustained below $900 million and/or a reliance on revolver borrowings. The following is a summary of Moody's ratings and its rating actions: On Review for Downgrade: Issuer: TransDigm Inc. Corporate Family Rating, Placed on Review for Downgrade, currently B1 Probability of Default Rating, Placed on Review for Downgrade, currently B1-PD Senior Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently B3 (LGD5) Senior Secured Bank Credit Facility, Placed on Review for Downgrade, currently Ba3 (LGD3) Senior Secured Regular Bond/Debenture, Placed on Review for Downgrade, currently Ba3 (LGD3) Issuer: TransDigm Holdings UK plc Senior Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently B3 (LGD5) Unchanged: Issuer: TransDigm Inc. Speculative Grade Liquidity Rating, unchanged at SGL-1 Outlook Actions: Issuer: TransDigm Inc. Outlook, Changed To Rating Under Review From Stable Issuer: TransDigm Holdings UK plc Outlook, Changed To Rating Under Review From Stable TransDigm Inc., headquartered in Cleveland, Ohio, is a manufacturer of engineered aerospace components for commercial airlines, aircraft maintenance facilities, original equipment manufacturers and various agencies of the US Government. TransDigm Inc. is the wholly-owned subsidiary of TransDigm Group Incorporated (TDG). Revenues for the twelve-month period ended December 31, 2019 were $5.7 billion. TRI-STATE ENTERPRISES: Unsecureds Will be Paid Over 36 Months ------------------------------------------------------------- Tri-State Enterprises, LLC, has proposed a Chapter 11 plan. The Debtor believes that the sale of assets, both in this case and in Mr. Michael Leon Brock's case, the consolidation of the Bank indebtedness and, perhaps most importantly, the loaning of the "seed" money from the Bank to the Debtor will provide the impetus to the Debtor to "take off' and go back to work, obtain lucrative aggregate purchasing contracts and provide the impetus and basis for Plan payments. The Plan treats claims and interests as follows: * Class 1 Administrative claims will be paid as provided for in future court orders, or as may be agreed upon, except that fees due to the Office of the United States Trustee will be paid as and when due until this case is closed, converted or dismissed. * Class 2 Priority Claims, if any, will be paid within 60 months from the date of the filing of the Petition herein, together with statutory interest thereon. * As to Class 3 Secured Claims of John Deere Financial, the Debtor will reamortize the indebtedness over a 6-year period, and will add any defaulted payments to the end of the indebtedness. In light of the current activities of the Federal Reserve in lowering interest rates to zero, the Debtor proposes to pay interest on this claim at 2.75% per annum. The first payment will be made upon the Effective Date of the Plan. John Deere's lien will remain unaltered and its claim is impaired. * Class 4 Secured Claims of Mahindra Finance will receive equal monthly installments over a 24-month period, with the first payment commencing upon the Effective Date of the Plan. In light of the current activities of the Federal Reserve in lowering interest rates to zero, the Debtor proposes to pay interest on this claim at 2.75% per annum. The first payment will be made upon the Effective Date of the Plan. Mahindra's lien shall remain unaltered and its claim is impaired. * The Class 5 Secured Claims of Potts Camp Bank is secured by a number of different items of collateral, both in this case, in Mr. Brock's case and in the case of entities owned by Mr. Brock but that are separate and distinct entities which are not in bankruptcy. The repayment of the Bank's indebtedness is reflected in the sale motions. * Class 6 Secured Claims of Synchrony will be paid in full upon the Effective Date of the Plan. * Class 7 General Unsecured Creditors will receive the net operating profits of the Debtor over a 36-month period. * Class 8 Equity Interest holder will maintain his ownership of the Debtor. A full-text copy of the Disclosure Statement dated March 16, 2020, is available at https://tinyurl.com/stqk7c4 from PacerMonitor.com at no charge. The Debtor's counsel: Craig M. Geno LAW OFFICES OF CRAIG M. GENO, PLLC 587 Highland Colony Parkway Ridgeland, MS 39157 Tel: 601-427-0048 Fax: 601-427-0050 E-mail: cmgeno@cmgenolaw.com About Tri-State Enterprises Tri-State Enterprises, LLC, was engaged, primarily, in land and brush clearing, and especially in the demolition of concrete and asphalt structures and improvements. Tri-State Enterprises sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Miss. Case No. 19-10292) on Jan. 22, 2019. At the time of the filing, the Debtor was estimated to have assets of less than $1 million and liabilities of less than $500,000. The case is assigned to Judge Jason D. Woodard. The Debtor hired the Law Offices of Craig M. Geno, PLLC, as its legal counsel. The Debtor's majority shareholder, Michael Leon Brock, filed his own individual Chapter 11 case (Case No. 19-10293). TRIBE BUYER: Moody's Lowers CFR to Caa1, Outlook Negative --------------------------------------------------------- Moody's Investors Service downgraded Tribe Buyer LLC's ratings, including its corporate family rating to Caa1 from B3 and its probability of default rating to Caa1-PD from B3-PD. At the same time, Moody's downgraded the instrument ratings on Tradesmen's senior secured first lien revolving credit facility and senior secured first lien term loan to Caa1 from B3. The outlook is negative. "The downgrade of Tradesmen's ratings is driven by the company's already elevated leverage preceding the onset of the coronavirus pandemic that is now expected to remain sustained above its previously indicated downgrade indicator 7 times," said Andrew MacDonald, Moody's analyst. "The negative outlook reflects the anticipated pressure on the company's credit quality, liquidity, and risk that revenue could decline rapidly, at least in the short term, as the spread of the coronavirus will likely deeply impact small and medium business customers in the nonresidential construction industry." The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The staffing industry sector has been one of the sectors most significantly affected given the tendency of employers to quickly cut temporary workers and reduce hiring when economic conditions deteriorate. Initial employment data stemming from the COVID-19 outbreak is extremely negative as the increase of initial jobless claims in the US rose to a record high 3.3 million claims for the week ending March 21, 2020 and is significantly higher than the previous record of 695,000 in October 1982. More specifically, the weaknesses in Tradesmen's credit profile, including its exposure to the US nonresidential construction industry have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Tradesmen of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Downgrades: Issuer: Tribe Buyer LLC Corporate Family Rating, Downgraded to Caa1 from B3 Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Senior Secured Bank Credit Facility, Downgraded to Caa1 (LGD3) from B3 (LGD3) Outlook Actions: Issuer: Tribe Buyer LLC Outlook, Changed To Negative From Stable RATINGS RATIONALE The Tradesmen's Caa1 CFR reflects the company's already high Moody's adjusted debt-to-EBITDA above 7 times and revenue declines in the low single digits for the twelve months ended September 30, 2019 before considering the impact of the coronavirus outbreak. The company also has limited scale, narrow end market focus, and high degree of competitive and cyclical risk. As a staffing services provider to small-to-medium sized contractors in the nonresidential construction sector, Tradesmen's cyclical swings tend to be more severe than a typical decline in construction spending. The company's field personnel are also exposed to safety events that can lead to unforeseen liability in the event of an increase in the frequency or severity of claims. Moody's anticipates that the company's earnings will continue to decline, weakening credit metrics and liquidity over the next 12 to 18 months. The $40 million revolving credit facility due 2022 has been largely drawn (excluding $12 million of capacity used to support letters of credit), leaving the company with approximately $55 million of cash as of March 2020. The company has also put in place a separate letters of credit facility that should free up the remaining letters of credit capacity in June. Moody's expects the company will look to rationalizing fixed charges to offset any revenue declines and anticipate working capital should initially be a source of cash in a downturn. Free cash flow is expected to be volatile during the next 12 to 18 months depending on the severity of the impact of coronavirus, however the company's existing cash balance and a lack of near-term maturities provides key support for the rating. The rating also benefits from Tradesman's strong market position as one of the largest service providers in most of the regional markets it serves. The company also has a flexible cost structure than can be adjusted if client spending weakens. The negative outlook reflects Moody's expectation of a weakening of credit metrics and liquidity given the company's exposure to temp staffing demand in the small to medium sized business nonresidential construction industry. Factors that would lead to an upgrade or downgrade of the ratings: Although not likely in the near term, the ratings could be upgraded if Tradesmen generates revenue and EBITDA growth such that debt-to-EBITDA is sustained below 7x and free cash flow-to-debt is in excess of 1%. Conversely, ratings could be downgraded if Moody's expects a material decline in earnings, revenues and sustained negative free cash flow. A downgrade is also likely if a distressed exchange is expected or if the company is unlikely to comply with its financial maintenance covenant. Tradesmen, based in Cleveland, OH and owned by affiliates of The Blackstone Group L.P., provides agency-based skilled craftsmen staffing services to the small to medium sized nonresidential construction industry in North America (mostly the U.S.). Revenue for the last twelve months ended September 30, 2019 is $725 million. TRIBUNE MEDIA: Court Disallows Robert Henke's Defamation Claims --------------------------------------------------------------- Bankruptcy Judge Brendan Linehan Shannon sustained Reorganized Debtors Tribune Media Company and affiliates' claim objection and disallows Robert Henke's claims. Henke was the subject of an article that appeared in the Baltimore Sun newspaper in 2007 entitled "A Modern-Day Ahab -- In pursuit of geologic immortality, inventor Robert Henke has sacrificed everything: comfort, career, family." Believing the article had caused him harm, Henke filed a defamation lawsuit against the Baltimore Sun in Maryland state court seeking $100 million in damages. Tribune Company and its affiliates, including the Baltimore Sun, filed Chapter 11 petitions on Dec. 8, 2008. Henke filed two claims against the Debtors based on the state court defamation complaint. The Debtors objected to Henke's claims. Following a hearing before the Honorable Kevin J. Carey, the Court sustained the Debtors' objection and the claims were disallowed. Henke appealed that decision to the United States District Court for the District of Delaware. On Feb. 15, 2019, the District Court ruled that Mr. Henke, who represented himself pro se, did not receive adequate notice that his hearing before Judge Carey was an evidentiary hearing on the merits and "was not afforded a fair chance to submit evidence to support his claim." Therefore, the District Court vacated the Bankruptcy Court order sustaining the Debtors' objection to Henke's claims and remanded the matter to the Bankruptcy Court. Henke alleges claims of defamation and misrepresentation against the Sun. He argues the Article contains statements that are defamatory, falsehoods, or omit crucial facts. Henke also alleges that the Sun made numerous misrepresentations which induced him to agree to the Article. At trial, Henke also alleged that the Sun stalked him and published articles that contained messages meant to intimidate him and his family. In reply, the Debtors argue that Henke has not fulfilled any of the elements for defamation, much less all of them. They also argue that the Sun did not make any misrepresentations to Henke and that other articles which Henke purported as showing stalking or intimidation of him or his family were simply coincidences. Under Maryland law, Henke must prove four elements to establish a defamation claim: (1) the Sun made a defamatory statement to a third person, (2) the statement was false, (3) the Sun was legally at fault in making the statement, and (4) Mr. Henke thereby suffered harm. The standard of fault that the Court must apply to a defamation claim varies depending on whether the plaintiff (here, Mr. Henke) is a public figure or a private individual. If a plaintiff is a public figure, then he must meet a higher standard of fault and show that the defendant published the defamatory statement with "actual malice." Otherwise, the plaintiff only needs to show that the defendant negligently made the defamatory statements. The Court holds that when evaluating a statement, the "primary emphasis [is placed] on verifiability of the statement" and a court should "examine the statement's language and context to determine if it could interpreted as asserting a fact." Here, the context and content of the Article's theme clearly reflect the author's opinion. References to Moby Dick's Captain Ahab, as well as descriptions of Mr. Henke's efforts as "obsessive" or in pursuit of "geologic immorality" are subjective statements that are consistent with the "rhetorical hyperbole and imaginative expression" that " 'negate the impression that the writing is stating fact.' "Such statements are not meant to be verifiable facts. Further, to support this opinion, the Article includes numerous facts and quotations drawn from author Gadi Dechter's interviews with Mr. Henke, his family and people who knew his work. There is no evidence that the underlying facts are false. Readers can draw their own conclusions (and form their own opinion) about those facts. Accordingly, the Court concludes that the evidence does not support a finding that the Article's theme is defamatory or false. Henke's defamation claims assert that the Article materially conceals "the possibility that he, Ms. Henke, and their firm and family had fallen victim to [a] campaign that targeted them with official and professional misconduct." Mr. Henke claims the Article omitted important details about the University's retaliation against him for his accusations of plagiarism and grade inflation. He further argues that the Article conceals material facts suggesting that government grant competitions were corrupted to ensure the proposals submitted by Mr. and Ms. Henke would fail. The Court finds that Henke has not proven that the Article is false because it omits additional facts that might cast him in a more favorable light. The excluded details either are not well-documented or are not material enough to change the tenor or meaning of the Article. Although the Article did not include all facts requested by Henke, the omission does not run afoul of Maryland law. In addition to the defamation claims, Mr. Henke asserts five counts of misrepresentation. To succeed on a claim of fraudulent misrepresentation, Mr. Henke must show five elements: (1) a false representation was made, (2) its falsity was either known to the maker or was made with such reckless indifference to the truth as to be the equivalent to actual knowledge of falsity; (3) the representation was made for the purpose of defrauding the plaintiff, (4) the plaintiff not only relied on the representation but had a right to rely on it and would not have done the thing from which the injury arose had the misrepresentation not been made, and (5) the plaintiff actually suffered damages directly resulting from the misrepresentation. Henke has fallen short of his burden. First, Henke's journal entries show that he knew the Article was going to be a "human interest" story that focused on him and on "devising something new that is useful and the troubles you experience" in development. There is no evidence that the Sun represented that it did not need proof of Henke's allegations. Moreover, the journal entries reflect that Dechter told Henke that writing about the Air Force discharge was a "key element of the story."Mr. Henke's journal notes that, when talking about the possibility of attending his son's court date, Mr. Dechter assured Mr. Henke that he "wouldn't exploit [his son],"but the journal also shows that he knew the Article would include reference to his son's problems. As far as Mr. Dechter's failure to mention his affiliation with the University, the Sun had no duty to disclose that information and it is neither relevant nor material. The Court concludes that Henke failed to prove that Mr. Dechter or the Sun made any fraudulent misrepresentations to Henke. And Henke has not proven that he suffered any damages as a result of any alleged misrepresentation. The bankruptcy case is in re: TRIBUNE MEDIA COMPANY, et al., Chapter 11, Debtors, Case No. 08-13141 (BLS) (Bankr. D. Del.). A copy of the Court's Opinion dated March 3, 2020 is available at https://bit.ly/2Uik4B4 from Leagle.com. Tribune Media Company, et al., Debtor, represented by Amy C. Andrews , Sidley Austin LLP, Norman L. Pernick -- npernick@coleschotz.com -- Cole Schotz P.C., Patrick J. Reilley -- preilley@coleschotz.com -- Cole Schotz P.C., Nathan Siegel -- nathansiegel@dwt.com -- Davis Wright Tremaine LLP & J. Kate Stickles -- kstickles@coleschotz.com -- Cole Schotz P.C. Litigation Trustee, Trustee, represented by Richard Scott Cobb -- cobb@lrclaw.com -- Landis Rath & Cobb LLP, Jeffrey R. Drobish , Landis Rath & Cobb LLP, J. Landon Ellis , Landis Rath & Cobb LLP, Jason Goldsmith , Akin Gump Strauss Hauer & Feld LLP, Deborah J. Newman , Akin Gump Strauss Hauer & Feld LLP & David M. Zensky -- dzensky@akingump.com -- Akin, Gump, Strauss, Hauer & Feld, LLP. Marc S. Kirschner, as Litigation Trustee, Trustee, represented by Kimberly A. Brown -- brown@lrclaw.com -- Landis Rath & Cobb LLP, Richard Scott Cobb -- cobb@lrclaw.com -- Landis Rath & Cobb LLP, Jeffrey R. Drobish, Landis Rath & Cobb LLP, Landon Ellis, Landis Rath & Cobb LLP, Hal Neier, Friedman Kaplan Seiler Adelman LLP & Holly M. Smith, Gellert Scali Busenkell & Brown, LLC. Zuckerman Spaeder LLP, Creditor Committee, represented by Kimberly A. Brown, Landis Rath & Cobb LLP & Matthew B. McGuire, Landis Rath & Cobb LLP. Tribune Media Company, headquartered in Chicago, Ill., benefits from television assets including 42 broadcast stations in 33 markets reaching 26% (with the reinstated UHF discount) of U.S. households and the WGN America network with subscribers approaching 80 million. Tribune Media holds minority equity interests in several media enterprises including TV Food Network which contribute cash distributions. The company emerged from Chapter 11 bankruptcy protection at the end of 2012 and certain creditors prior to Chapter 11 filing are now shareholders with funds of Oaktree Capital Management LP (roughly 16%), Angelo, Gordon & Co. LP (7%), and JPMorgan Chase (7%) representing three of the five largest shareholders. Reported revenue totaled $1.9 billion for 2016. TRIUMPH GROUP: S&P Alters Outlook to Negative, Affirms 'B-' ICR --------------------------------------------------------------- S&P Global Ratings affirmed its ratings on Triumph Group Inc., including the 'B-' issuer credit rating, and revised the outlook to negative from stable. The impact of the coronavirus pandemic on global air travel will likely reduce demand for Triumph's products and services, pressuring earnings and cash flow. Airlines are cutting capacity because of the significant decline in air travel, which will likely reduce demand for the company's aftermarket parts and services. They are also likely to defer or cancel orders, which could cause Boeing Co. and Airbus SE to reduce jetliner production and decrease orders for Triumph's aircraft structures and components. Demand for business jets is also likely to be lower, but S&P does not expect sales for military programs to be affected. Triumph's operations could also be disrupted by government restrictions on travel or employee illness. The negative outlook reflects that earnings and cash flow could be materially worse than S&P expects because of impact of the coronavirus pandemic on demand or the company's operations. "We could lower the rating if the impact of the coronavirus pandemic on earnings and cash flow materially deteriorates liquidity. We could also lower the rating if these factors or other operational problems increase leverage such that we believe the company's capital structure has become unsustainable," S&P said. "We could revise the outlook stable if we believe debt to EBITDA will remain below 7.5x, cash flow will not be materially worse than our current expectations of a use of $60 million-$70 million, and liquidity remains adequate. This could occur if the impact on the company's sales from the coronavirus are not severe, production is not interrupted for an extended period, and efforts to reduce costs moderate the effect on earnings and cash flow," the rating agency said. TWO DELUNA: Unsecured Creditors to Recover 100% in 5 Years ---------------------------------------------------------- Two Deluna, LLC, has proposed a Plan of Reorganization. The Debtor proposes to fund its Chapter 11 Plan through income received from the operation of its restaurant business. The Plan proposes to pay secured creditors the full amount of their secured claim by continuing to pay the regular monthly payments as they come due. The Plan proposes to pay priority tax debts in full over the remaining number of months that is 60 months from the date the case was filed. Unsecured creditors will receive a distribution of 100% of the allowed amount of the claim to be paid over 60 months with interest accruing at 4.5% per annum. A full-text copy of the Disclosure Statement dated March 16, 2020, is available at https://tinyurl.com/whe25qu from PacerMonitor.com at no charge. About Two Deluna Two Deluna, LLC, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Fla. Case No. 19-30205) on March 1, 2019. At the time of the filing, the Debtor was estimated to have assets of less than $100,000 and liabilities of less than $500,000. The case has been assigned to Judge Jerry C. Oldshue Jr. UNDER ARMOUR: Moody's Lowers CFR to Ba2, Outlook Negative --------------------------------------------------------- Moody's Investors Service downgraded Under Armour, Inc.'s ratings, including its corporate family rating to Ba2 from Ba1, probability of default rating to Ba2-PD from Ba1-PD and its senior unsecured notes rating to Ba2 from Ba1. At the same time, Moody's downgraded the company's speculative grade liquidity rating to SGL-2 from SGL-1. The rating outlook is negative. The downgrade and negative outlook reflect Under Armour's weak operating performance related to the challenges it is facing in reinvigorating growth in its core North American market and the compounding effects of the unprecedented disruption caused by the rapid global spread of the coronavirus. Widespread temporary store closures and expected weaker discretionary consumer spending will likely lead to further pressure on an already very low EBIT margin forecast in 2020 and reduced free cash flow. The SGL-2 speculative grade liquidity rating reflects Moody's expectation for good liquidity, supported by $788 million of cash on the balance sheet as of December 31, 2019, that was recently boosted by a $700 million draw down under its $1.25 billion revolving credit facility. Downgrades: Issuer: Under Armour, Inc. Corporate Family Rating, Downgraded to Ba2 from Ba1 Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD Senior Unsecured Notes, Downgraded to Ba2 (LGD4) from Ba1 (LGD4); Speculative Grade Liquidity Rating, Downgraded to SGL-2 from SGL-1 Outlook Actions: Issuer: Under Armour, Inc. Outlook, Changed To Negative from Rating Under Review RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The apparel sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Under Armour's credit profile, including its exposure to discretionary consumer spending have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Under Armour remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Under Armour of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Under Armour's Ba2 CFR reflects its well-known brand and solid competitive position as a leading developer, marketer and distributor of branded performance apparel, footwear and accessories in the U.S. and internationally. Also considered are the company's track record of innovation and Moody's positive view of the global sports apparel market, which provides credible organic growth opportunities, particularly in international markets where the company is significantly under penetrated. The rating is supported by governance considerations including a conservative financial strategy that focused on debt reduction and maintaining moderate financial leverage. Under Armour is constrained by its reliance on a single brand and limited geographic reach which expose the company to economic cyclicality and inherent changes in consumer preferences in a concentrated region. This is evidenced by the ongoing challenges in the North American market, which accounted for around 70% of 2019 net revenue. Under Armour has taken significant action over the past two years to improve its overall profit margins, balance sheet and cash flow. However, sales declines are forecasted to accelerate in 2020 will lead to significantly weaker profitability and credit metrics. Factors that would lead to an upgrade or downgrade of the ratings: Ratings could be downgraded if the company fails to stabilize revenue and profit declines, or should liquidity deteriorate. Quantitative metrics include EBIT Margin sustained below 5% or EBITA/interest below 3.0x. Given the negative outlook, a ratings upgrade is unlikely over the very near term. Over time, an upgrade would require sustained improvement in operating performance, including sustained growth in its key North American market, as well as maintenance of very good liquidity. Key metrics include operating margins sustained in the mid-to-high single digit range and EBITA/interest above 3.5x. Headquartered in Baltimore, Maryland, Under Armour, Inc. is a designer, developer, marketer and distributor of footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. It also has developed its Connected Fitness platform, one of the world's largest digital health and fitness communities. Revenues for the year ended December 31, 2019 exceeded $5.2 billion. The principal methodology used in these ratings was Apparel Methodology published in October 2019. UNION GROVE: Bank of Bartlett Says It's Rejecting Plan ------------------------------------------------------ Bank of Bartlett, a holder of a secured claim against Union Grove Baptist Church, objects to the Disclosure Statement filed by Union Grove Baptist Church. The Bank of Bartlett objects to the adequacy of the Debtor's proposed Disclosure Statement for the following non-exclusive grounds: a. The overview of business operations section of the Disclosure Statement provides in Section D, under the hearing Events Precipitating the Chapter 11 Case, that the Debtor experienced financial difficulties paying its mortgage to the Bank of Bartlett. b. The Debtor's Disclosure Statement, in the Assets and Valuation section, provides that the value of the Debtor's real property is $340,000 according to the appraisal of the Shelby County Trustee. The Bank is unable to determine where this alleged value is shown in the records of the Shelby County Trustee. c. The Disclosure Statement references Appendix I, Plan of Reorganization and Appendix II, Profit and Loss Statements, but no appendixes with this information are attached to the filed Disclosure Statement. The Bank of Bartlett will not accept the Plan described in the Disclosure Statement. Even if the Debtor's property valuation is accurate, the initial proposed payment on the Bank's secured claim does not even cover accruing interest. Attorneys for Bank of Bartlett: Douglas M. Alrutz WYATT, TARRANT & COMBS, LLP 6070 Poplar Ave., Suite 300 Memphis, TN 38119 Tel: 901-537-1000 E-mail: adalrutz@wyattfirm.com About Union Grove Baptist Church Union Grove Baptist Church, is a nonprofit corporation organized under the laws of the State of Tennessee. The Debtor operates 2285 Frayser Blvd., Memphis, Tennessee 38127. Its assets and operations are in Memphis, Shelby County, Tennessee. The corporation's effective date is Aug. 11, 2014, in Memphis, Shelby County, Tennessee. Union Grove Baptist Church sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Tenn. Case No. 19-27459) on Sept. 18, 2019. At the time of the filing, the Debtor had estimated assets of between $100,001 and $500,000 and liabilities of between $500,001 and $1 million. The case is assigned to Judge David S. Kennedy. The Debtor is represented by the Law Office of John Edward Dunlap. URS HOLDCO: Moody's Cuts CFR & Senior Secured Rating to B3 ---------------------------------------------------------- Moody's Investors Service downgraded the ratings of URS Holdco, Inc., including the corporate family rating and senior secured rating to B3 from B2, and the probability of default rating to B3-PD from B2-PD. All ratings are under review for further downgrade. The rating downgrades reflect Moody's expectation of weakening conditions in the company's automotive end-markets and more broadly in the macroeconomic environment. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The automotive sector is among the sectors that have been significantly affected by the shock given its sensitivity to consumer demand and sentiment and general economic activity. More specifically, United Road's credit profile, including its exposure to the North American auto industry cycle, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and United Road remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the expected impact on United Road of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. In its review, Moody's will consider (i) the company's liquidity position, (ii) evolving market conditions, including the potential magnitude of the impact of the coronavirus outbreak on demand/shipment volumes and the timing of those declines, (iii) the company's ability to adapt its costs and capital spending to possibly rapid declines in demand, and (iv) the prospects to restore credit metrics when economic activity recovers. RATINGS RATIONALE The ratings reflect United Road's automotive exposure with a high concentration to original equipment manufacturers that are facing a decline in demand for new vehicles, exacerbated by the coronavirus pandemic. This will weigh meaningfully on revenue, earnings and cash flow through at least 2020 and possibly into 2021, and likely constrain liquidity. Cash flow is likely to weaken particularly over the next few months as car shipments are anticipated to be low. Given these factors, the company's cash balance and ABL revolver availability are relatively modest. Moody's also notes the company's modest margins provide limited insulation against potentially severe drops in new deliveries in the near term and its weaker leverage profile following primarily debt-funded acquisitions is likely to deteriorate amidst continued end market pressures. The ratings consider United Road's good market position in the auto carrier industry and its somewhat less cyclical remarketed (used car) segment. Its partial use of third party/owner operators could provide some flexibility to manage costs in the face of the anticipated market pressures. Moody's took the following actions on URS Holdco, Inc. Corporate Family Rating, Downgraded to B3 from B2; Placed Under Review for further Downgrade Probability of Default Rating, Downgraded to B3-PD from B2-PD; Placed Under Review for further Downgrade Senior Secured Bank Credit Facility, Downgraded to B3 (LGD4) from B2 (LGD4); Placed Under Review for further Downgrade Outlook, changed to Ratings Under Review from Stable Factors that could lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if Moody's expects liquidity to deteriorate, including negative free cash flow, a material decline in the cash balance or decreasing revolver availability. The ratings could also be downgraded with expectations of weakening operating performance, including if Moody's expects interest coverage to materially worsen or debt/EBITDA to exceed 6x on a sustained basis. Downward ratings momentum would also be driven by aggressive financial policies. Upward ratings pressure is unlikely until demand and freight volumes broadly increase along with general economic activity in the US. Over time, the ratings could be upgraded with sustained earnings growth that results in stronger credit metrics, including Moody's expectation of debt/EBITDA to approach 4.5x, EBITDA less capex-to-interest exceeding 1.5x, and a material improvement in operating margins, as well as consistently positive free cash flow and greater revolver availability. The principal methodology used in these ratings was Surface Transportation and Logistics published in May 2019. URS Holdco Inc., based in Romulus, Michigan, is a leading provider of over-the-road transportation of automobiles and vehicle logistics in the United States and Canada through its principal operating subsidiary, United Road Services, Inc. Revenues were $710 million as of the last twelve months ended September 30, 2019. URS Holdco Inc. is a portfolio company of The Carlyle Group, a private equity firm. US SHIPPING: Moody's Places B3 CFR on Review for Downgrade ---------------------------------------------------------- Moody's Investors Service placed all of its ratings for U.S. Shipping Corp. on review for downgrade, including the B3 rating on the senior secured first-lien term bank credit facility, the B3 Corporate Family Rating and B3-PD Probability of Default Rating. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The shipping sector is one of the sectors that will be significantly affected by the shock given its sensitivity to consumer demand, general economic growth and industrial activity. More specifically, USSC's credit profile, including its highly cyclical markets, elevated financial leverage and approaching debt maturities, has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and USSC remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the likely impact on USSC of the breadth and severity of the shock, the broad deterioration in credit quality it has triggered and its lingering uncertainty. In its review, Moody's will consider: (i) the company's liquidity profile, noting also it has a near term revolver maturity (due in June 2020) albeit undrawn and first lien term loan that will come due in June 2021; (ii) the ability to refinance and extend debt maturities in the near term; (iii) evolving market conditions, including the potential magnitude of the coronavirus pandemic and oil price dislocations on demand and pricing conditions; and (iii) the prospects for USSC to improve credit metrics meaningfully when economic activity recovers. Moody's took the following actions of U.S. Shipping Corp: Corporate Family Rating, Placed on Review for Downgrade, currently B3 Probability of Default Rating, Placed on Review for Downgrade, currently B3-PD Senior secured bank credit facility, Placed on Review for Downgrade, currently B3 (LGD3) Outlook, changed to Ratings Under Review from Stable Factors that could lead to an upgrade or downgrade of the ratings: The ratings could be downgraded with expectations of weakening operating performance, including a deterioration in free cash flow, interest coverage or debt/EBITDA sustained above 6x (all metrics Moody's adjusted). Failure to timely extend or refinance debt maturities in the near term or debt-funded fleet growth would also pressure the ratings. A ratings upgrade is unlikely in the near term given the company's small size and until the demand environment broadly improves along with general economic activity. Over time, upward ratings momentum could develop with expectations of material growth in revenues and stronger credit metrics such that Moody's expects debt/EBITDA to be sustained below 4.5x and funds from operations (FFO) plus interest-to-interest above 3.5x. The principal methodology used in these ratings was Shipping Industry published in December 2017. U.S. Shipping Corp, headquartered in Edison, NJ, owns four modern articulated tug-barge units and two legacy tankers serving the US Jones Act chemical and petroleum markets. Revenues approximated $102 million for the last twelve months ended September 30, 2019. US SILICA: Moody's Cuts CFR to Caa1 & Alters Outlook to Stable -------------------------------------------------------------- Moody's Investors Service downgraded US Silica Company, Inc.'s Corporate Family Rating to Caa1 from B2, Probability of Default Rating to Caa1-PD from B2-PD and the rating on the company's senior secured credit facility to Caa1 from B2. In addition, Moody's downgraded US Silica's Speculative Grade Liquidity Rating to SGL-3 from SGL-2. The outlook was changed to stable from negative. "With the sudden and severe decline in oil & gas prices, Moody's expects a significant decline in demand and prices of frac sand to negatively impact U.S. Silica's profitability and credit metrics partially offset by its mining capacity in the Permian basin," said Emile El Nems, a Moody's VP-Senior Analyst. The downgrade reflects Moody's expectation that revenues, profitability and key credit metrics will deteriorate further during 2020 due to ongoing volatility in the oil and natural gas end market and persistent weakness in the frac sand industry. Despite, mine closures and production cuts, Moody's, does not expect any significant recovery in the price of frac sand in the short term. At year-end 2020, Moody's (inclusive of Moody's adjustments) expects debt-to-EBITDA to increase to 5.5x and EBIT-to-interest expense to decline to 0.3x. Downgrades: Issuer: US Silica Company, Inc. Probability of Default Rating, Downgraded to Caa1-PD from B2-PD Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Corporate Family Rating, Downgraded to Caa1 from B2 Senior Secured Bank Credit Facility, Downgraded to Caa1 (LGD3) from B2 (LGD3) Outlook Actions: Issuer: US Silica Company, Inc. Outlook, Changed to Stable from Negative RATINGS RATIONALE US Silica's Caa1 CFR reflects the persistent weakness in the frac sand industry, declining profitability and deteriorating credit metrics. The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook and falling oil prices are creating a severe and extensive credit shock across the energy sector, a key end market for US Silica. More specifically, the weakness in US Silica's credit profile has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Governance considerations include risks associated with having a more aggressive financial policy. Given the company's current capital structure and the trading levels of its debt securities, Moody's expects the company will conduct additional debt repurchases at discounted levels. These may be deemed a distressed exchange by Moody's. At the same, Moody's takes into consideration, the company's market position as one of the largest producers of frac and industrial / specialty sand in the US, its distribution capability, its product mix and adequate liquidity profile. The stable outlook reflects Moody's expectation that US Silica's industrial sand segment and its sizable cash position will provide relative operating and financial stability during the ongoing volatility in the oil & gas end market. US Silica's SGL-3 Speculative Grade Liquidity Rating reflects Moody's expectation that the company will maintain an adequate liquidity profile resulting from its ability to fund operations, service its debt and invest in capital expenditure with cash flow. Liquidity is also supported by $186 million in cash on hand and the lack of near-term debt maturities, as its $100 million revolver expires in 2023 and its $1.2 billion term loan matures in 2025. The principal financial covenant under the existing revolving credit facility is a maximum leverage ratio covenant test of 3.75x that is triggered whenever usage under the revolver exceeds 30% of the revolving commitment. Factors that would lead to an upgrade or downgrade of the ratings: The rating could be upgraded if: - The company improves its free cash flow and its liquidity profile - Oil and natural gas end markets stabilize The rating could be downgraded if: - The company's liquidity profile deteriorates - The potential losses for lenders increase - Operating margins further deteriorates The principal methodology used in these ratings was Building Materials published in May 2019. Based in Katy, Texas, U.S. Silica operates 25 silica mining and processing facilities. It is one of the largest producers of commercial silica and engineered materials derived from minerals in North America. The company holds approximately 527 million tons of reserves, including API spec frac sand and 59 million tons of reserves of diatomaceous earth, perlite, and clays. U.S. Silica is currently organized into two segments: (1) Oil & Gas Proppants (oil & gas), which serves the oil & gas exploration and production industry, and (2) Industrial & Specialty Products (ISP), which serves the foundry, automotive, building products, sports and recreation, glassmaking and filtration industries. US STEEL CORP: S&P Lowers ICR to 'B-' on Weaker Cash Flow --------------------------------------------------------- S&P Global Ratings lowered its ratings on U.S. Steel Corp. and its senior unsecured debt to 'B-' from 'B'. U.S. Steel closed out 2019 with adjusted debt to EBITDA of about 10x because of deteriorating market conditions and higher debt, about 6x if S&P excludes about $275 million of fourth-quarter restructuring charges. Steel markets have since weakened, and credit conditions are markedly more difficult as the company is increasingly likely to require external funding in the next 12-18 months. It can scale back capex to preserve cash during this period of poor visibility, but this would only defer much needed strategic investments that could reduce operating costs and improve its competitive position. The negative outlook reflects the risks that deteriorating cash flow could increase the need for external funding amid difficult conditions in capital markets. "We could lower the rating unless U.S. Steel reduces its free operating cash drain in 2020, which we believe will tighten liquidity in 2021 with about a year of major capital spending remaining. We believe such a scenario would be characterized by persistently high leverage above 6x and questionable access to capital markets," S&P said. "We could revise the outlook to stable if the company preserves adequate liquidity as it nears completion of its significant Mon Valley investments amid better market conditions. In such a scenario, we expect adjusted debt to EBITDA would return below 5x and any free cash drain could be addressed internally or with better access to capital markets. We estimate this could occur with a rebound in hot-rolled coil steel prices to about $625 per ton in 2021 and higher volumes because of an improving economy," the rating agency said. USA LANDS: Acting U.S. Trustee Objects to Disclosures & Plan ------------------------------------------------------------ David W. Asbach, Acting United States Trustee for Region 5 (UST), objects to final approval of the Disclosure Statement and Chapter 11 Plan of Reorganization of debtor USA Lands, LLC. In its objection, the U.S. Trustee points out that: * According to the Debtor, the following creditors have secured claims i) the Evangeline Bank & Trust Company in the amount of 70,786.78; ii) The Union Bank in the amount of 32,643.27; iii) BancorpSouth Bank in the amount of $203,616.17. The Debtor elaborated that due to a sale of Pineville Property, it paid BancorpSouth Bank $92,000 and anticipated paying it another $45,000 following Feb. 12, 2020. Therefore, the amount of BancorpSouth Bank claim has been substantially reduced since the case was filed. * Class 5, unsecured creditors, and class 6, equity holders, also have claims against the Debtor albeit in unknown amounts. It remains unclear as to how or when class 5 and 6 will be paid following confirmation. In fact, the Debtor proposed to make no payments under the Plan. * The Debtor did not provide any property valuations or even an estimate as to how much could it raise within the next 6 months by selling all properties. * Based upon the monthly operating reports filed by the Debtor, the UST calculated a fee for the fourth quarter of 2019 in the amount of $325. However, because the Debtor did not disclose that he made the $92,000 Disbursement, the fee must be recalculated. A full-text copy of U.S. Trustee's Objection dated March 19, 2020, is available at https://tinyurl.com/rdqpadc from PacerMonitor at no charge. About USA Lands USA Lands, LLC, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. La. Case No. 19-80784) on Aug. 20, 2019. At the time of the filing, the Debtor was estimated assets of less than $50,000, and liabilities of between $100,001 and $500,000. The case is assigned to Judge Stephen D. Wheelis. Thomas R. Willson, Esq., is the Debtor's legal counsel. VEA INVESTMENTS: U.S. Trustee Objects to Plan & Disclosures ----------------------------------------------------------- Nancy J. Gargula, United States Trustee for Region 21, objects to final approval of the Disclosure Statement and confirmation of the Plan of Reorganization for Debtor VEA Investments, LLC, and states: * The United States Trustee objects to approval of the Disclosure Statement and to confirmation because the Disclosure Statement and Plan fails to identify and address the following nine secured claims filed in this case. * In addition to the failure to address the secured claims, the Disclosure Statement also fails to include a payment schedule of the amount of each monthly payment to be made under the Plan. * The Plan provides for the sole equity holder to retain her interests in the Debtor without any contribution of new value. In the event the Debtor does not obtain the vote of the impaired Class 9 – General Unsecured Creditors, the Debtor will be unable to satisfy the absolute priority standard of confirmation set forth in 11 U.S.C. Section 1129(b)(2)(B)(ii). * The Debtor has failed to pay all statutory fees. As of the date of this Objection, the Debtor is delinquent in payment of $325.52 in quarterly fees for the fourth quarter of 2019, which came due on January 31, 2020, and additional fees will be due for the first quarter of 2020 on March 31, 2020. Until the Debtor can pay all fees it has incurred, the Court cannot confirm this Plan. A full-text copy of the U.S. Trustee's objection to plan and disclosure dated March 17, 2020, is available at https://tinyurl.com/yxy9evgm from PacerMonitor at no charge. About VEA Investments VEA Investments LLC owns seven properties in Orlando, Florida, having a total current value of $1.67 million. VEA Investments filed a petition for relief under Chapter 11 of Title 11 of the United States Code (Bankr. M.D. Fla. Case No. 19-04148) on June 25, 2019. In the petition signed by Viviana M. Tejada Cruz, managing member, the Debtor disclosed $1,677,350 in assets and $1,602,591 in liabilities. Jeffrey Ainsworth, Esq. at Bransonlaw, PLLC, is the Debtor's counsel. VIKING CRUISES: Moody's Lowers CFR to B2, On Review for Downgrade ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Viking Cruises Ltd and Viking Ocean Cruises Ltd. including its Corporate Family Rating to B2 from B1, Probability of Default Rating to B2-PD from B1-PD, its senior secured rating to Ba3 from Ba2, and senior unsecured rating to Caa1 from B3. The ratings remain on review for further downgrade. "The downgrade reflects the material earnings decline Viking will face in 2020 as it suspends operations through June 30 which will cause leverage to increase well beyond its downgrade trigger of 5.75x," stated Pete Trombetta, Moody's lodging and cruise analyst. "Viking has announced that it has suspended cruise operations through June 30, resulting in highly negative free cash flow, and that there will be a slow recovery when sailings resume. While Moody's expects that earnings will improve in 2021, Moody's anticipates that bookings will be weak relative to 2019, which will result in Viking's debt/EBITDA approximating 6.0x as of year-end 2021," added Trombetta. Downgrades: Issuer: Viking Cruises Ltd Probability of Default Rating, Downgraded to B2-PD from B1-PD; Placed Under Review for further Downgrade Corporate Family Rating, Downgraded to B2 from B1; Placed Under Review for further Downgrade Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 (LGD5) from B3 (LGD5); Placed Under Review for further Downgrade Issuer: Viking Ocean Cruises Ltd. Senior Secured Regular Bond/Debenture, Downgraded to Ba3 (LGD3) from Ba2 (LGD2); Placed Under Review for further Downgrade RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The cruise sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Viking's credit profile, including its exposure to increased travel restrictions for US citizens which represents a majority of the company's revenue and earnings have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and the company remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact on Viking from the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Viking's credit profile is supported by its well-recognized brand name in both the premium segment of the river cruising and ocean cruising markets. Viking estimates that it has nearly a 50% market share of the North American sourced river cruise passengers. Since entering the ocean cruising market with its first ship in 2015, Viking has grown that segment such that it accounts for about 40% of Viking's revenue. Viking's credit profile is also enhanced by its good forward booking visibility and short lead time to build new river vessels which allows Viking to adjust river cruise capacity to demand trends. Viking's historical willingness to bring in new equity partners provides credit support. In 2016 when Viking needed to boost liquidity, TPG Capital and Canada Pension Plan Investment Board (each with one board member) contributed capital. On a combined basis, they own a 23% stake in the company. In the short run, Viking's credit profile will be dominated by the length of time that cruise operations continue to be highly disrupted and the resulting impacts on the company's cash consumption and its liquidity profile. The normal ongoing credit risks include Viking's high leverage which Moody's forecasts could approximate 6.0x at the end of 2021 assuming modest levels of EBITDA in 2020 and some recovery in 2021, but not back to the earnings generated in 2019. The company's credit profile is also constrained by its limited diversification both in terms of geography and customer base and the cyclicality, seasonality, and capital intensity inherent in the cruise industry. Governance risks, particularly financial strategy, specifically related to dividends, the absence of target leverage levels, and the lack of a committed revolver are also constraints. The review will focus on Viking's ability to reduce expenses, its success in limiting customer deposit outflows, and its ability to take other actions to preserve liquidity during this period of significant earnings decline. The review will also consider the possibility of operations being suspended beyond June 30, and the potential impact on the industry over the next two years, including the pace at which customers will resume cruising again. Its current assumption is that cruise operations are suspended through June 30, with diminished occupancy and net yield in the third quarter and fourth quarter. Moody's forecasts that earnings will recover in 2021, but not back to the levels of 2019. Viking entered 2020 with good cash balances of about $1.7 billion, with no committed revolving credit facility. Moody's will assess the potential severity and duration of the drop in earnings, and the effects on the company's metrics and liquidity. Factors that would lead to an upgrade or downgrade of the ratings: Factors that could lead to a downgrade include operations being suspended for longer than through June 30 or updated expectations for a weaker recovery, resulting in debt/EBITDA remaining above 6.0x on a sustained basis. Factors that could lead to a ratings confirmation include operations ramping up in early July and signs of good demand trends for the second half of 2020 and 2021, leading to an expectation that the company's finances will stabilize in the near term and that debt/EBITDA will approach 5.5x over the medium term. Viking operates a fleet of 72 river cruise vessels and six ocean cruise as of September 30, 2019. Its river cruises operate in over 30 countries largely in Continental Europe. About 85% of its total river and ocean customers are sourced from North America. TPG Capital and Canada Pension Plan Investment Board own a minority interest (about 23% on a combined basis) in Viking Holdings Ltd, parent company of Viking Cruises. The remaining ownership is indirectly held under a trust in which Torstein Hagen has a life interest. Net cruise revenues were about $2.0 billion for the last 12 months ended September 30, 2019. VIRTUAL CITADEL: Allowed to Obtain $7.6-Mil Loan on Final Basis --------------------------------------------------------------- Judge Jeffery W. Cavender of the U.S. Bankruptcy Court for the Northern District of Georgia authorized Virtual Citadel, Inc. and its affiliates to obtain post-petition post-petition term loan from Bay Point Capital Partners in a principal amount not to exceed $7.6 million. The Debtor is also authorized to use the proceeds of the DIP Loan for the purposes set forth on the Initial Approved Budget and subject to the terms and conditions set forth in the Order. The proceeds from the DIP Loan will be used to satisfy all prepetition secured claims to the DIP Collateral. The DIP Lender is granted allowed superpriority administrative expense claims on the DIP Collateral for all obligations owed by the Debtors pursuant to the DIP Loan Agreement. To secured the DIP Loan and all amounts and obligations due thereunder, the DIP Lender is granted continuing, valid, binding, enforceable, non-avoidable, and automatically and properly perfected post-petition, first-priority security interests in and liens on all DIP Collateral. About Virtual Citadel Virtual Citadel, Inc. -- https://vcitadel.com -- is a comprehensive turnkey enterprise hosting provider in Atlanta, Georgia. vCitadel owns and operates tier 1 and tier 2 data centers throughout the metro Atlanta area. Founded in 1990, vCitadel provides custom hosting solutions for cloud, data, and co-location applications. Virtual Citadel, Inc., and four affiliates sought Chapter 11 protection (Bankr. N.D. Ga. Case No. 20-62725) on Feb. 14, 2020. The Debtors tapped POLSINELLI PC as counsel; BAKER DONELSON BEARMAN, CALDWELL & BERKOWITZ, PC as conflicts counsel; and GLASS RATNER as financial advisor. WATERBRIDGE OPERATING: S&P Lowers ICR to 'B-'; Outlook Negative --------------------------------------------------------------- S&P Global Ratings lowered its issuer credit ratings on Texas-based water management solutions company WaterBridge Midstream Operating LLC (Midstream) and its parent company, WaterBridge Operating LLC (WaterBridge), to 'B-' from 'B'. S&P's recovery rating on its senior secured term loan B remains '3', indicating its expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default. The '1' recovery rating on the $150 million super-priority revolving credit facility (RCF) is unchanged, resulting in a 'B+' rating. The outlook is negative. The rating action reflects the downward revision of S&P's commodity price deck, which the rating agency expects will result in a material decline in forecast volumes and EBITDA from its previous forecast. Under S&P's $25/barrel (bbl) West Texas Intermediate (WTI) crude price assumption for the remainder of 2020, many producers will likely scale back their drilling activity and growth initiatives in the immediate term. This results in S&P's assumption of adjusted EBITDA in the $170 million area for 2020. "In addition, we believe the company will not realize the same volumetric assumptions it previously assumed for the numerous acquisitions completed over the last 12 months. These acquisitions, which have been partially financed with debt, could result in the company having limited cushion to its net leverage financial covenant under the RCF. We now forecast WaterBridge to achieve consolidated adjusted leverage of approximately 7x compared to our prior forecast of 4.25x-4.5x. That said, our calculation of consolidated adjusted leverage incorporates the preferred securities issued at its parent companies, which we treat as 100% debt. Despite the net leverage covenant constraints under its RCF, we believe WaterBridge has adequate liquidity over the next two years even if it cannot draw on this facility as its sponsors have shown their support in the past and we anticipate the company to reduce costs and capital spending," S&P said. The negative outlook reflects S&P's expectation that volumes and EBITDA will be sharply lower in 2020 due to the weak crude oil price environment, resulting in consolidated adjusted leverage metrics above 6x. The rating agency expects this to pressure the net leverage covenant. "We could lower our rating on WaterBridge if the company's capital structure becomes unsustainable or if its liquidity position deteriorates without additional support from its sponsors. This could also occur if we expect the company to violate its financial covenants," S&P said. "We could revise the outlook on WaterBridge to stable if it maintains an adjusted debt-to-EBITDA ratio of less than 6.5x and we continue to view its liquidity position as adequate," the rating agency said. WESTERN MIDSTREAM: S&P Cuts Senior Secured Debt Rating to 'BB+' --------------------------------------------------------------- S&P Global Ratings lowered the issue ratings on Western Midstream Operating LP (Western) senior secured debt to 'BB+', with a '3' recovery rating (expected recovery: 55%). "We now expect lower volumes on Western's gathering and processing systems in 2020 given the material decline in commodity prices in the first quarter of 2020. The company has limited direct exposure to commodity prices given its fixed-fee contract profile that is heavily weighted to demand charges. However, we expect OXY and other customers to revise drilling plans downward, which will lead to declining volumes in our base case over the next two years. As a result, we are now expecting EBITDA to decline year over year in 2020 and 2021, while leverage will remain in the 4.75x – 5x range over the next few years. Prior to the updated volume decline, we were expecting Western to grow its EBITDA and deleverage gradually, but we no longer think that's likely given the market stress," S&P said. "The CreditWatch listing reflects the likelihood of a downgrade at its parent company, OXY. We could lower the ratings on OXY if it does not address its debt maturities in 2021. We expect to resolve the CreditWatch placement of both companies toward the end of this year," the rating agency said. WHATABRANDS LLC: Moody's Alters Outlook on B1 CFR to Negative ------------------------------------------------------------- Moody's Investors Service affirmed Whatabrands LLC's B1 Corporate Family Rating, B1-PD Probability of Default Rating and B1 secured bank facility rating. The outlook was changed to negative from stable. "The negative outlook reflects the significant uncertainty surrounding the potential length and severity of restaurant closures and the ultimate impact that these closures will have on Whatabrands revenues, earnings and liquidity." stated Bill Fahy, Moody's Senior Credit Officer. "The outlook also takes into account the negative impact on consumers ability and willingness to spend on eating out until the crisis materially subsides," Fahy added. The affirmation of the B1 CFR reflects the continuation of drive-through, delivery and curbside pick-up operations. It also reflects Whatabrand's good liquidity which will allow it to manage through several months of significant revenue decline, and Moody's expectation that Whatabrands will manage the business to preserve liquidity and then use cash flow to reduce debt once the crisis subsides. Affirmations: Issuer: Whatabrands LLC Probability of Default Rating, Affirmed B1-PD Corporate Family Rating, Affirmed B1 Senior Secured Bank Credit Facility, Affirmed B1 (LGD3) Outlook Actions: Issuer: Whatabrands LLC Outlook, Changed To Negative From Stable RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The restaurant sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Whatabrands credit profile, including its exposure to widespread location restrictions and closures have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Whatabrands remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Its action reflects the impact of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. Whatabrands B1 CFR benefits from above average unit volumes that indicate strong brand awareness in its core market of Texas, a diversified day-part and customer mix, material amount of contributed equity and good liquidity. Whatabrands is constrained by its modest scale and geographic concentration in Texas. Governance risk is a credit constraint given Whatabrands financial sponsor ownership as financial sponsors typically support more aggressive financial strategies including higher leverage, extractions of cash flow via dividends, and more aggressive growth strategies. Restaurants are deeply entwined with sustainability, social and environmental concerns given their operating model with regards to sourcing food and packaging, as well as having an extensive labor force and constant consumer interaction. While these may not directly impact the credit, these factors could impact brand image and result in a more positive view of the brand overall. Factors that would lead to an upgrade or downgrade of the ratings: Factors that could result in a stable outlook include a clear plan and time line for the lifting of restrictions on restaurants that result in a sustained improvement in operating performance, liquidity and credit metrics. Given the negative outlook an upgrade is unlikely at the present time. However, a higher rating would require debt to EBITDA of around 4.5 times and EBITDA less capex coverage of gross interest of approximately 2.5. An upgrade would also require very good liquidity. A downgrade could occur if on a sustained basis debt to EBITDA was over 5.75 times and EBITDA less capex to interest coverage was below 1.5 times. A deterioration in liquidity could also result in a downgrade. Whatabrands, LLC, a wholly-owned subsidiary of Sunrise Group Holdings, Inc. (Sunrise) upon close, owns the Whataburger fast food brand which operates and franchises a total of 828 units (713 owned and 115 franchised) in 10 states with the substantial majority in Texas. Sunrise will be majority owned by funds affiliated with BDT Capital Partners and current owners. Annual revenues are about $2.2 billion while system sales are approximately $2.4 billion. WHITING PETROLEUM: Case Summary & 30 Largest Unsecured Creditors ---------------------------------------------------------------- Lead Debtor: Whiting Petroleum Corporation 1700 Lincoln Street Suite 4700 Denver, CO 80203 Business Description: Whiting Petroleum Corporation and its Debtor affiliates are an independent exploration and production company with an oil focused asset base. The Debtors' primary production and development activities are located in North Dakota and the Rocky Mountain region, with additional oil and gas properties located in Texas. The Debtors' assets predominately are mature properties with stable, high-quality, oil-weighted production. Headquartered in Denver, Colorado, the Debtors have approximately 500 employees. Visit www.whiting.com for more information. Chapter 11 Petition Date: April 1, 2020 Court: United States Bankruptcy Court Southern District of Texas Five affiliates that concurrently filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code: Debtor Case No. ------ -------- Whiting Petroleum Corporation (Lead Case) 20-32021 Whiting Canadian Holding Company ULC 20-32020 Whiting Oil and Gas Corporation 20-32022 Whiting Resources Corporation 20-32023 Whiting US Holding Company 20-32024 Judge: Hon. David R. Jones Debtors' Counsel: Brian Schartz, P.C. Anna Rotman, P.C. KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 609 Main Street Houston, Texas 77002 Tel: (713) 836-3600 Fax: (713) 836-3601 Email: brian.schartz@kirkland.com anna.rotman@kirkland.com - and - Gregory F. Pesce, Esq. 300 North LaSalle Street Chicago, Illinois 60654 Tel: (312) 862-2000 Fax: (312) 862-2200 Email: gregory.pesce@kirkland.com - and - Stephen Hessler, P.C. 601 Lexington Avenue New York, New York 10022 Tel: (212) 446-4800 Fax: (212) 446-4900 Email: stephen.hessler@kirkland.com Debtors' Co-Bankruptcy Counsel: Matthew D. Cavenaugh, Esq. Jennifer F. Wertz, Esq. Veronica A. Polnick, Esq. JACKSON WALKER L.L.P. 1401 McKinney Street, Suite 1900 Houston, Texas 77010 Tel: (713) 752-4200 Fax: (713) 752-4221 Email: mcavenaugh@jw.com jwertz@jw.com vpolnick@jw.com Debtors' Financial Advisor & Investment Banker: MOELIS & COMPANY Debtors' Restructuring Advisor: ALVAREZ & MARSAL Debtors' Notice, Claims, and Solicitation Agent, and Administrative Advisor: BANKRUPTCY MANAGEMENT SOLUTIONS, INC. D/B/A STRETTO https://cases.stretto.com/whitingpetroleum Total Assets as of December 31, 2019: $7,636,721,000 Total Debts as of December 31, 2019: $3,611,750,000 The petitions were signed by Correne S. Loeffler, chief financial officer. A copy of Whiting Petroleum Corporation's petition is available for free at PacerMonitor.com at: https://is.gd/nZabDw Consolidated List of Debtors' 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- -------------- 1. The Bank of New York 6.625% Senior $1,000,000,000 Mellon Trust Company, N.A. Notes Due 2026 2 North LaSalle - 7th Floor Chicago, IL 60602 Attn: Sharon K. McGrath Title: Vice President Tel: (312) 827-3262 Email: sharon.mcgrath@bnymellon.com 2. The Bank of New York 5.75% Senior Notes $774,000,000 Mellon Trust Company, N.A. due March 2021 2 North LaSalle - 7th Floor Chicago, IL 60602 Attn: Sharon K. McGrath Title: Vice President Tel: (312) 827-3262 Email: sharon.mcgrath@bnymellon.com 3. The Bank of New York 6.25% Senior Notes $408,000,000 Mellon Trust Company, N.A. due April 2023 2 North LaSalle - 7th Floor Chicago, IL 60602 Attn: Sharon K. McGrath Title: Vice President Tel: (312) 827-3262 Email: sharon.mcgrath@bnymellon.com 4. The Bank of New York 1.25% Convertible $262,000,000 Mellon Trust Company, N.A. Senior Notes due 2 North LaSalle - 7th Floor April 2020 Chicago, IL 60602 Attn: Sharon K. McGrath Title: Vice President Tel: (312) 827-3262 Email: sharon.mcgrath@bnymellon.com 5. Schlumberger Technology Trade Payables $8,839,604 Corporation 5599 San Felipe 17th Floor Houston, TX 77056 Attn: Olivier Le Peuch Title: CEO Tel: (281) 635-5194 Fax: (281) 285-0233 Email: lepeuch1@slb.com 6. Halliburton Energy Trade Payables $8,366,793 Services Inc. 3000 N. Sam Houston Pkwy E. Houston, TX 77032 Attn: Jeff Miller Title: Chairman, President & CEO Tel: (281) 871-4000 Fax: (281) 876-4455 Email: jeff.miller@halliburton.com 7. Polar Midstream Trade Payables $3,662,779 2300 Windy Ridge Parkway Suite 840N Atlanta, GA 30339 Attn: J. Heath Deneke Title: President & CEO Tel: (832) 413-4770 8. Baker Hughes Trade Payables $2,566,083 17021 Aldine Westfield Road Houston, TX 77073 Attn: Lorenzo Simonelli Title: Chairman & CEO Tel: (713) 439-8600 Fax: (337) 837-3493 9. BNN Redtail, LLC Trade Payables $2,338,161 370 Van Gordon St Lakewood, CO 80228 Attn: Mark Ritchie Title: Co-Founder & Vice President Tel: (303) 357-4733 Email: mark.ritchie@bnn-energy.com 10. Targa Resources Partners LP Trade Payables $2,336,550 811 Louisiana St Suite 2100 Houston, TX 77002 Attn: Matthew J. Meloy Title: CEO Tel: (713) 584-1000 Fax: (713) 584-1100 11. Sun Well Service Inc. Trade Payables $2,090,568 118 84th St. W Williston, ND 58801 Attn: Kevin Jeffreys Title: Vice President Tel: (701) 774-3001 Fax: (701) 774-0774 12. Estvold Oilfield Services Inc Trade Payables $1,713,026 3962 84th Ave NW New Town, ND 5876 Attn: Jake Estvold Title: Owner Tel: (701) 627-4346 Fax: (701) 627-2778 13. Triangle Electric Inc. Trade Payables $1,691,100 2644 1st Ave E Williston, ND 58801 Attn: David Hoerner Title: CFO Tel: (701) 157-6783 14. Black Hawk Energy Trade Payables $1,654,054 Services Ltd. 118 84th St. Williston, ND 58801 Attn: Mike Davis Title: President & CEO Tel: (701) 774-0774 Fax: (701) 774-3001 15. Pioneer Drilling Trade Payables $1,580,868 Services Ltd. 1250 Northeast Loop 410 Suite 1000 San Antonio, TX 78209 Attn: Stacy Locke Title: President & CEO Tel: (210) 082-7689 Email: slocke@pioneers.com 16. Purity Oilfield Services LLC Trade Payables $1,507,326 2101 Cedar Springs Road Suite 650 Dallas, TX 75201 Attn: Marshall T. Hunt Title: President Tel: (214) 472-1700 17. CS Welding, LLC Trade Payables $1,488,474 1101 4th St SE Suite 206 Stanley, ND 58784 Attn: Cesar Salgado Title: President Tel: (701) 162-2706 18. National Oilwell Varco LP Trade Payables $1,452,065 7909 Parkwood Circle Drive Houston, TX 77036 Attn: Jose Bayardo Title: Vice President & CFO Tel: (336) 660-3830 Fax: (713) 435-2195 Email: jose.bayardo@nov.com 19. Northern Oilfield Trade Payables $1,413,341 Services, LLC 1637 44th St W Williston, ND 58801 Attn: Sheldon Van Vost Title: CEO Tel: (833) 356-5924 20. McKenzie Energy Partners LLC Trade Payables $1,374,319 PO Box 1037 Watford City, ND 58854 Attn: Thomas McKenzie Title: CEO Tel: (888) 858-7747 21. CTAP, LLC Trade Payables $1,127,198 2585 Trailridge Dr East Lafayette, CO 80026 Attn: Seth Merrill Title: President Tel: (844) 488-2827 Fax: (303) 661-0809 22. Rusco Operating LLC Trade Payables $1,100,399 98 San Jacinto Blvd Suite 550 Austin, TX 78701 Attn: Xuan Yong Title: Owner Tel: (713) 355-6695 23. Atlas Oil Company Trade Payables $1,078,209 24501 Ecorse Rd Taylor, MI 48180 Title: CFO Tel: (313) 292-5500 Fax: (313) 292-4580 Email: jrivera@atlasoil.com 24. Key Energy Services LLC Trade Payables $924,610 1301 McKinney St. Suite 1800 Houston, TX 77010 Attn: J. Marshall Dodson Title: President & CEO Tel: (713) 365-4300 Email: rsaltiel@keyenergy.com 25. Chemoil Corporation Trade Payables $843,215 40 E. Sheridan Avenue Suite 400 Oklahoma City, OK 73104 Attn: Chad O'Neil Title: Vice President Tel: (405) 560-5436 Fax: (405) 605-5499 Email: chad.oneil@chemoil.com 26. NexTier Completion Trade Payables $824,789 Solutions, Inc. 3990 Rogerdale Houston, TX 77042 Attn: Robert Drummond Title: President & CEO Tel: (713) 332-6000 27. Jmac Resources Inc. Trade Payables $789,776 121 48th Ave SW Williston, ND 58801 Attn: Darla Miller Title: CFO Tel: (701) 177-8511 Email: darlam@jmacresources.com 28. Chevron USA Inc. Trade Payables $770,648 6001 Bollinger Canyon Road San Ramon, CA 94583 Attn: Michael K. Wirth Title: CEO Tel: (925) 584-1000 Email: mkwirth@chevron.com 29. Perfx Wireline Services LLC Trade Payables $767,139 1525 Raleigh Ave #500 Denver, CO 80204 Attn: Charlie Thomas Title: President Tel: (832) 242-0097 30. Jamex Marketing, LLC Litigation Claim Undetermined c/o Reese Marketos LLP 750 N. Saint Paul St., Suite 600 Dallas, TX 75201 Attn: Joel Reese Title: Partner Tel: (214) 382-9801 Email: Joel.Reese@rm-firm.com WILLIAMS COMMUNICATIONS: Seeks to Hire Hadden & Assoc. as Broker ---------------------------------------------------------------- Williams Communications, Inc., seeks approval from the U.S. Bankruptcy Court for the Northern District of Alabama to hire Hadden & Assoc. Inc. as its broker. The firm will help the Debtor market its assets and will get 10 percent of the net sale price or $25,000 (whichever is greater) as compensation for its services. Doyle Hadden of Hadden & Assoc. disclosed in court filings that he is "disinterested" within the meaning of Section 101(14) of the Bankruptcy Code. Hadden & Assoc. can be reached through: Doyle Hadden Hadden & Assoc. Inc. 147 Eastpark Drive Celebration, FL 34747 Phone: 321-939-3141 About Williams Communications Williams Communications, Inc., a privately held company in the radio and television broadcasting business, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ala. Case No. 19-41720) on Oct. 11, 2019. In the petition signed by Walt Williams, Jr., president, the Debtor estimated $50,000 in assets and $1 million to $10 million in liabilities. Judge Tamara O. Mitchell presides over the case. Harry P. Long, Esq., at The Law Offices of Harry P. Long, LLC, represents the Debtor as counsel. WOODS SEALING: Bankr. Administrator Unable to Appoint Committee --------------------------------------------------------------- The U.S. Bankruptcy Administrator for the Middle District of Alabama on March 31 disclosed in a filing that no official committee of unsecured creditors has been appointed in the Chapter 11 case of Woods Sealing and Striping, Inc. About Woods Sealing and Striping Woods Sealing and Striping, Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. M.D. Ala. Case No. 20-80453) on March 26, 2020. At the time of the filing, the Debtor disclosed assets of between $500,001 and $1 million and liabilities of the same range. The Debtor is represented by Michael A. Fritz Sr., Esq. YRC WORLDWIDE: Moody's Lowers CFR to Caa1, On Review for Downgrade ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of truck carrier YRC Worldwide Inc., including the Corporate Family Rating to Caa1 from B2, the Probability of Default Rating to Caa1-PD from B2-PD and the senior secured rating to B1 from Ba2. The Speculative Grade Liquidity Rating was downgraded to SGL-4 from SGL-3. All ratings have been placed under review for further downgrade. RATINGS RATIONALE The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The transportation sector is one of the sectors that will be significantly affected by the shock, in part given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in YRC's credit profile, including its thin margins, lack of revolver availability and limited covenant headroom, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, which will likely affect YRC's credit metrics as the outbreak continues to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. Its action reflects the expected impact on YRC of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered. In its review, Moody's will consider (i) the company's liquidity, including the possibility of a covenant breach (ii) the severity of the impact of the coronavirus outbreak on freight shipments and network operations, (iii) the ability of the company to adapt its costs and investments in a timely manner to possibly rapid changes in freight demand, and (iv) the potential to restore credit metrics when economic activity recovers following the coronavirus outbreak. The ratings consider the challenges that YRC faces in realizing the cost savings from greater operational flexibility under last year's negotiated labor contract amid an already weak freight environment. At the same time, the implementation of the company's network optimization strategy could also slow down due to greater economic uncertainty and potential network disruptions. With further declines in shipments imminent, earnings will be pressured at a time when YRC's covenant headroom is very limited and the company has minimal availability under its revolving credit facility. As an operator of heavy-duty trucks with diesel engines, YRC is also exposed to the environmental risk that emission regulations will become more stringent, which could result in higher engine costs. Factors that would lead to an upgrade or downgrade of the ratings: The ratings could be downgraded if Moody's expects that (adjusted) operating margins remain below 2.5% for a prolonged period or that the company's cash balance diminishes to below $50 million. The ratings could also be downgraded if Moody's expects debt/EBITDA to be in excess of 7 times or (FFO+interest)/interest of less than 1.5 times on a sustained basis. There will be no upward pressure on the ratings until freight shipments increase along with general economic activity in the US. The ratings could be upgraded if the company improves (adjusted) operating margins to levels that enable the company to undertake a capital spending program of at least 4% of revenues. Other considerations include debt/EBITDA of less than 6 times, (FFO+interest)/interest of more than 2 times and the ability to maintain adequate headroom under financial covenants. The following rating actions were taken: Downgrades: Issuer: YRC Worldwide Inc. Corporate Family Rating, Downgraded to Caa1 from B2; Placed Under Review for further Downgrade Probability of Default Rating, Downgraded to Caa1-PD from B2-PD; Placed Under Review for further Downgrade Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3 Senior Secured Bank Credit Facility, Downgraded to B1 (LGD2) from Ba2 (LGD2); Placed Under Review for further Downgrade Outlook Actions: Issuer: YRC Worldwide Inc. Outlook, Changed To Rating Under Review From Stable The principal methodology used in these ratings was Surface Transportation and Logistics published in May 2019. YRC Worldwide Inc. is a provider of over-the-road transportation services and has one of the largest less-than-truckload ("LTL") transportation networks in North America. The company offers longer-haul LTL shipments as well as regional, next-day and time-sensitive services, with a total fleet of approximately 14,100 owned and leased tractors. Revenues in 2019 were $4.9 billion. ZATO INVESTMENTS: MSR Buying All Real Properties for $630K ---------------------------------------------------------- Zato Investments Ltd. Co. asks the U.S. U.S. Bankruptcy Court for the Eastern District of Arkansas to authorize the sale of the following real properties: (i) 4 Wellford Drive, Little Rock, Pulaski County, Arkansas; (ii) 4 Althea Circle, Little Rock, Pulaski County, Arkansas; (iii) 17 Alameda Drive, Little Rock, Pulaski County, Arkansas; (iv) 11 Rosemunn Drive, Little Rock, Pulaski County, Arkansas; (v) 13 Rosemunn Drive, Little Rock, Pulaski County, Arkansas; (vi) 1800 Sanford Drive, Little Rock, Pulaski County, Arkansas; (vii) 2006 Sanford Drive, Little Rock, Pulaski County, Arkansas; (viii) 5912 Southwick Drive, Little Rock, Pulaski County, Arkansas, to MSR Investments, LLC for $630,000. The Debtor has received a cash offer to purchase all of its real estate identified in Schedule A to its petition. MSR is owned by Mike Rushin, Jr. the Debtor's principal and the son of the owners of the Debtor entity. The Real Estate is subject to consensual encumbrances as follows: a. Real estate mortgages in favor of JTS Capital Realty SB, LLC, successor in interest to Simmons Bank that is itself a successor by merger with Metropolitan National Bank, with debt obligations secured by said mortgages in an approximate amount of $619,569 subject to any credits due the Debtor; b. For the real estate located at 1800 Sanford Drive, 11 Rosemunn Drive and 13 Rosemunn Drive only, a second mortgage in favor of Donna Bosley and Christie White, with a debt obligation secured by said mortgage in an approximate amount of $86,000 subject to any credits due the Debtor. The sale of the Real Estate is free and clear of all mortgages, liens, claims and interests of any kind, but the lien of JTS will attach to the proceeds of the sale to the extent of its claims on the date of closing. The sale is not free and clear of the mortgage of Bosley and White, and such mortgage will be subordinated to the mortgage of First National Bank who is the financing party for MSR, and thereafter MSR will perform the obligations of the Debtor pursuant to the Bosley White debt obligation and mortgage after the sale closes or as may be negotiated by Bosley, White, and MSR. In regard to notice to JTS, the Debtor states that JTS is not an insured depository institution, and that JTS has appeared in the case by its attorneys, and has filed claims 2, 3 and 4 in the case. In regard to notice to Bosley and White, the Debtor states that neither Bosley nor White are insured depository institutions, and that Bosley and White have filed claim 5 in the case. A copy of the Contract is available at https://tinyurl.com/s7btw9a from PacerMonitor.com free of charge. About Zato Investments Zato Investments Ltd. Co. owns real estate and improvements, consisting of single-family and multi-family residences for lease to the public at Little Rock, Arkansas. Zato Investments sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Ark. Case No. 19-13288) on June 24, 2019. At the time of the filing, the Debtor estimated assets of between $500,001 and $1 million and liabilities of the same range. The case is assigned to Judge Phyllis M. Jones. Stanley V. Bond, Esq., of Bond Law Office, is the Debtor's counsel. ZENERGY BRANDS: Unsecured Creditors to Have 10% Recovery Under Plan ------------------------------------------------------------------- Debtors Zenergy Brands, Inc.; NAUP Brokerage, LLC; Zenergy Labs, LLC; Zenergy Power & Gas, Inc.; Enertrade Electric, LLC; Zenergy & Associates, Inc.; and Zen Technologies, Inc. filed with the United States Bankruptcy Court for the Eastern District of Texas, Sherman Division, a Chapter 11 Plan of Reorganization and a Disclosure Statement. The goal in filing the Chapter 11 cases was to maximize recoveries for all parties-in-interest while allowing the Debtors to reorganize to continue their operations. The Plan is designed to accomplish the reorganization of the Debtors' estates and the result of extensive arm's-length negotiations between TCA Global and TCA Special Situations Credit Strategies ICAV. The Reorganized Debtor will execute a promissory note made payable to the order of the GUC Trustee and secured by liens and security interests in, on and against substantially all assets of the Reorganized Debtor with such liens and security interests, securing the amount of the TCA Portion, having equal priority and dignity to the TCA liens and security interests in the same assets. The principal amount will be 10 percent of the Allowed Class 5 Unsecured Claims. All GUC Trust Costs will be paid from the GUC Trust Assets and will not impact the principal amount of the GUC Promissory Note. The Plan provides for the continued operations of the Reorganized Debtor. Following the Effective Date of the Plan, the Reorganized Debtor will issue new equity which will be owned as follows: 53.2% owned by TCA Global; 41.8% owned by TCA Special Situations; and 5% of New Equity distributed under Class 4 to General Unsecured Creditors. The Debtors' current Equity Interests will be deemed canceled and extinguished and shall be of no further force and effect and the holders of Allowed Equity Interests will not receive a distribution. The Plan provides for the creation of a liquidating trust to hold the GUC Trust Assets, which include: (1) certain causes of action that the GUC Trust may pursue on behalf of the General Unsecured Creditors; (2) the GUC Cash Payment in the amount of $200,000 within the first 60 days after the Effective Date; and (3) the GUC Promissory Note securing a total of a 10% distribution on all allowed General Unsecured Claims. The GUC Trust will be governed by the GUC Trust Agreement, which will be filed as a supplement to the Plan. The Plan provides that GUC Trust will be funded with the New Value Payment. Allowed general unsecured claims totaling $7 million will recover 10%. In full satisfaction, settlement, release, extinguishment and discharge of such Claim, the holders of the allowed general unsecured claims will receive free and clear of any claims, liens, rights or security interests, a pro rata distribution from the proceeds of the GUC Trust, including the $200,000 GUC Cash Payment, the GUC Promissory Note, the proceeds of the Actions, GUC Equity and any other GUC Trustee Assets. Funds needed to make distributions under the Plan will come from the operations of the Reorganized Debtor, the GUC Trust Assets, the New Value Payment, including the GUC Administrative Expense Amount, and the Confirmation Credit Facility, if any. A full-text copy of the Disclosure Statement dated March 17, 2020, is available at https://tinyurl.com/ud5ma95 from PacerMonitor at no charge. The Debtors are represented by: FOLEY GARDERE LLP FOLEY & LARDNER LLP Marcus A. Helt 2021 McKinney Avenue, Suite 1600 Dallas, Texas 75201 Telephone: (214) 999-3000 Facsimile: (214) 999-4667 - and - Jack G. Haake Washington Harbour 3000 K Street, N.W., Suite 600 Washington, D.C. 20007-5109 Telephone: (202) 672-5300 Facsimile: (202) 672-5399 About Zenergy Brands Zenergy Brands, Inc. -- https://whatiszenergy.com/ -- is a next-generation energy and technology company engaged in selling energy-conservation products and services to commercial, industrial and municipal customers. It is a business-to-business company whose platform is a combined offering of energy services and smart controls. Zenergy Brands is a public company, fully reporting to the Securities and Exchange Commission and currently trading on the OTCQB. Zenergy Brands and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Tex. Lead Case No. 19-42886) on Oct. 24, 2019. As of June 30, 2019, Zenergy Brands had total assets of $1,944,089 and liabilities of $8,369,818. The cases have been assigned to Judge Brenda T. Rhoades. The Debtors tapped Foley & Lardner LLP as their legal counsel, and Stretto as their claims, noticing and solicitation agent. The Office of the U.S. Trustee appointed creditors to serve on the official committee of unsecured creditors in the Debtors' cases on Nov. 4, 2019. The committee is represented by Kane Russell Coleman Logan PC. [^] BOOK REVIEW: The Sorcerer's Apprentice - Medical Miracles ------------------------------------------------------------- Author: Sallie Tisdale Publisher: BeardBooks Softcover: 270 pages List Price: $34.95 Order your own personal copy at http://is.gd/9SAfJR An earlier edition of "The Sorcerer's Apprentice" won an American Health Book Award in 1986. The book has been recognized as an outstanding book on popular science. Tisdale brings to her subject of the wide nd engrossing field of health and illness the perspective, as well as the special sympathies and sensitivities, of a registered nurse. She is an exceptionally skilled writer. Again and again, her descriptions of ill individuals and images of illnesses such as cancer and meningitis make a lasting impression. Tisdale accomplishes the tricky business of bringing the reader to an understanding of what persons experience when they are ill; and in doing this, to understand more about the nature of illness as well. Her style and aim as a writer are like that of a medical or science journalist for leading major newspaper, say the "New York Times" or "Los Angeles Times." To this informative, readable style is added the probing interest and concern of the philosopher trying to shed some light on one of the central and most unsettling aspects of human existence. In this insightful, illuminating, probing exploration of the mystery of illness, Tisdale also outlines the limits of the effectiveness of treatments and cures, even with modern medicine's store of technology and drugs. These are often called "miracles" of modern medicine. But from this author's perspective, with the most serious, life-threatening, illnesses, doctors and other health-care professionals are like sorcerer's trying to work magic on them. They hope to bring improvement, but can never be sure what they do will bring it about. Tisdale's intent is not to debunk modern medicine, belittle its resources and ways, or suggest that the medical profession holds out false hopes. Her intent is do report on the mystery of serious illness as she has witnessed it and from this, imagined what it is like in her varied work as a registered nurse. She also writes from her own experiences in being chronically ill when she was younger and the pain and surgery going with this. She writes, "I want to get at the reasons for the strange state of amnesia we in the health professions find ourselves in. I want to find clues to my weird experiences, try to sense the nature of being sick." The amnesia of health professionals is their state of mind from the demands placed on them all the time by patients, employers, and society, as well as themselves, to cure illness, to save lives, to make sick people feel better. Doctors, surgeons, nurses, and other health-care professionals become primarily technicians applying the wonders of modern medicine. Because of the volume of patients, they do not get to spend much time with any one or a few of them. It's all they can do to apply the prescribed treatment, apply more of it if it doesn't work the first time, and try something else if this treatment doesn't seem to be effective. Added to this is keeping up with the new medical studies and treatments. But Tisdale stepped out of this problem-solving outlook, can-do, perfectionist mentality by opting to spend most of her time in nursing homes, where she would be among old persons she would see regularly, away from the high-charged atmosphere of a hospital with its "many medical students, technicians, administrators, and insurance review artists." To stay on her "medical toes," she balanced this with working occasional shifts in a nearby hospital. In her hospital work, she worked in a neonatal intensive care unit (NICU), intensive care unit (ICU), a burn center, and in a surgery room. From this combination of work with the infirm, ill, and the latest medical technology and procedures among highly-skilled professionals, Tisdale learned that "being sick is the strangest of states." This is not the lesson nearly all other health-care workers come away with. For them, sick persons are like something that has to be "fixed." They're focused on the practical, physical matter of treating a malady. Unlike this author, they're not focused consciously on the nature of pain and what the patient is experiencing. The pragmatic, results-oriented medical profession is focused on the effects of treatment. Tisdale brings into the picture of health care and seriously-ill patients all of what the medical profession in its amnesia, as she called it, overlooks. Simply in describing what she observes, Tisdale leads those in the medical profession as well as other interested readers to see what they normally overlook, what they normally do not see in the business and pressures of their work. She describes the beginning of a hip-replacement operation, the surgeon "takes the scalpel and cuts -- the top of the hip to a third of the way down the thigh -- and cuts again through the globular yellow fat, and deeper. The resident follows with a cautery, holding tiny spraying blood vessels and burning them shut with an electric current. One small, throbbing arteriole escapes, and his glasses and cheek are splattered." One learns more about what is actually going on in an operation from this and following passages than from seeing one of those glimpses of operations commonly shown on TV. The author explains the illness of meningitis, "The brain becomes swollen with blood and tissue fluid, its entire surface layered with pus...The pressure in the skull increases until the winding convolutions of the brain are flattened out...The spreading infection and pressure from the growing turbulent ocean sitting on top of the brain cause permanent weakness and paralysis, blindness, deafness...." This dramatic depiction of meningitis brings together medical facts, symptoms, and effects on the patient. Tisdale does this repeatedly to present illness and the persons whose lives revolve around it from patients and relatives to doctors and nurses in a light readers could never imagine, even those who are immersed in this world. Tisdale's main point is that the miracles of modern medicine do not unquestionably end the miseries of illness, or even unquestionably alleviate them. As much as they bring some relief to ill individuals and sometimes cure illness, in many cases they bring on other kinds of pains and sorrows. Tisdale reminds readers that the mystery of illness does, and always will, elude the miracle of medical technology, drugs, and practices. Part of the mystery of the paradoxes of treatment and the elusiveness of restored health for ill persons she focuses on is "simply the mystery of illness. Erosion, obviously, is natural. Our bodies are essentially entropic." This is what many persons, both among the public and medical professionals, tend to forget. "The Sorcerer's Apprentice" serves as a reminder that the faith and hope placed in modern medicine need to be balanced with an awareness of the mystery of illness which will always be a part of human life. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. 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