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/raid1/www/Hosts/bankrupt/TCR_Public/210402.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 2, 2021, Vol. 25, No. 91 Headlines ADAPTHEALTH LLC: Moody's Confirms Ba3 CFR on AeroCare Transaction ADMIRAL PROPERTY: Unsecureds to Split At Least $20K in Sale Plan AEROCENTURY CORP: To Auction Assets in Bankruptcy AL NGPL: Moody's Assigns First Time Ba3 Corporate Family Rating ALAMO STRATEGIC: Case Summary & 20 Largest Unsecured Creditors ANGLIN CULTURED STONE: Seeks to Hire Gellert Scali as Legal Counsel ARCOSA INC: Moody's Assigns First Time Ba2 Corp Family Rating ARETEC GROUP: Moody's Rates New $400M Sr. Unsecured Notes 'Caa2' ATHLETICO HOLDINGS: Moody's Alters Outlook on B2 CFR to Stable BWX TECHNOLOGIES: Moody's Rates New Unsecured Notes Due 2029 'Ba3' CASTEX ENERGY: Seeks Approval to Hire Claro Group, Appoint CRO CHAMP ACQUISITION: Moody's Alters Outlook on B2 CFR to Stable CIELO VISTA: US Trustee Opposes Amended Disclosure Statement CONSOL ENERGY: Moody's Rates New $75MM Secured Bonds 'Caa1' CONTINENTAL COIFFURES: Unsecured Creditors to Recover 3% in Plan CORELOGIC INC: Moody's Assigns 'B2' CFR & Rates New Term Loan 'B1' CRESTWOOD EQUITY: Moody's Alters Outlook on Ba3 CFR to Stable DIOCESE OF CAMDEN: Hires Prime Clerk as Administrative Advisor EARTHWORX & SALES: Seeks Approval to Hire Wilson Accounting EAST RIDGE RETIREMENT: Fitch Puts 2014 Bonds on Watch Negative EL PASO COUNSELING: Says Talks to Assume Lease With HTA Ongoing EPIC Y-GRADE: Moody's Lowers CFR to Caa3 on Weak Liquidity FAIRBANKS COMPANY: Taps Logan & Company as Balloting Agent FERRELLGAS PARTNERS: Completes Chapter 11 Restructuring FORD MOTOR: Moody's Alters Outlook on Ba2 CFR to Stable FORD MOTOR: Moody's Alters Outlook on Ba2 Ratings to Stable FRASIER MEADOWS: Fitch Assigns BB+ Issuer Default Rating FUTURUM COMMUNICATIONS: Seeks to Hire Hoff Law Offices as Counsel GENERAL MOTORS: Moody's Affirms Ba2 Rating on Preferred Stock GOODYEAR TIRE: Fitch Rates $1BB 2031/2033 Unsecured Notes 'BB-' GOODYEAR TIRE: Moody's Rates New $1BB Unsec. Guaranteed Notes 'B2' GREAT AMERICAN: Seeks to Hire Patrick Law Offices as Legal Counsel GREYLOCK CAPITAL: Asks Court to Dismiss Chapter 11 Case GRIDDY ENERGY: Resists Customers' Bid for Official Committee GTT COMMUNICATIONS: Note Forbearance, Loan Extended to April 15,202 HENRY FORD VILLAGE: Med Healthcare Has $69M Opening Bid HOPLITE INC: Case Summary & 11 Unsecured Creditors HOWARD HUGHES: Moody's Affirms Ba2 CFR on Continued Improvement HUNT COMPANIES: Moody's Assigns B2 CFR, Outlook Stable HUNTER FAN: Moody's Assigns 'B2' CFR & First Lien Debt 'B2' HYDRX FARMS: Cannabis Producer Starts CCAA Proceedings II-VI INC: Fitch Puts 'BB' LongTerm IDR on Watch Negative KNS ACQUISITION: Moody's Assigns First Time B2 Corp Family Rating LUXURY DINING: Fig & Olive Plan Approved for Creditor Vote MAD RIVER: Unsecured Creditors to Recover 100% If Sold for $7.19M MALLINCKRODT PLC: Seeks Court Okay for $35 Million In Exec Bonuses MBM SAND: Wind Down to Be in Accordance With Company Agreement MERITAGE HOMES: Fitch Assigns BB+ Rating on Proposed Unsec. Notes MERITAGE HOMES: Moody's Rates New $400M Unsecured Notes 'Ba1' METHANEX CORP: Fitch Affirms 'BB' LongTerm Issuer Default Rating MICHAELS COMPANIES: Moody's Assigns B1 CFR on Proposed Financing MUSCLEPHARM CORP: Swings to $3.2 Million Net Income in 2020 NATIONAL RIFLE ASSOCIATION: Secret Board Meeting Can be Raised NEUROCARE CENTER: Unsecured Creditors Will Receive $194K in Plan NINE ENERGY: Moody's Lowers CFR to Caa3 on Restructuring Risks NTH SOLUTIONS: Seeks Cash Collateral Access OLMA-XXI INC: Court Approves Disclosure Statement PARKLAND CORP: Fitch Assigns BB Rating on Proposed USD Unsec. Notes PEARL HOLDING III: Moody's Withdraws 'Caa1' Corp Family Rating PEELED INC: Seeks to Hire Newpoint as Restructuring Advisor PEELED INC: Seeks to Hire Rupp Baase as Special Counsel PENSKE AUTOMOTIVE: Moody's Alters Outlook on Ba1 CFR to Stable PRIORITY HOLDINGS: Moody's Assigns B2 CFR on Planned Refinancing REGIONAL HEALTH: Posts $9.7 Million Net Loss in 2020 ROBBIN'S NEST: May 19 Plan & Disclosure Hearing Set SANITECH LLC: Seeks Approval to Hire Dennery as Legal Counsel SCHOOL DISTRICT: Seeks to Hire Bruner Wright as Legal Counsel SDI PROPERTIES: Trustee Hires Miles & Stockbridge as Counsel STA TRAVEL: Seeks to Hire CBRE Inc. as Real Estate Advisor SUZUKI CAPITAL: Seeks to Hire Platzer Swergold as Legal Counsel TENET HEALTHCARE: Fitch Affirms 'B' LongTerm IDR, Outlook Stable TI GROUP: Moody's Affirms B1 CFR & Alters Outlook to Positive TORY BURCH: Moody's Assigns First Time Ba3 Corp. Family Rating TRIDENT HOLDINGS: Seeks to Hire Andersen Law Firm as Counsel UNITED AIRLINES: Fitch Cuts IDR to 'B+' & Alters Outlook to Stable UNITED SHORE: Fitch Rates Proposed $700MM Unsecured Debt 'B+' UNITED WHOLESALE: Moody's Rates Planned $700M Unsecured Bond 'Ba3' VERMILION ENERGY: Moody's Lowers CFR to B1 on Declined Production VILLA TAPIA CORP: Unsecured Creditors to Get 100% in 60-Month Plan VINE ENERGY: Fitch Assigns First-Time 'B(EXP)' LongTerm IDR VINE ENERGY: Moody's Assigns First Time B2 Corp. Family Rating WESTERN DIGITAL: Fitch Affirms 'BB+' LT Issuer Default Rating [^] BOOK REVIEW: The Rise and Fall of the Conglomerate Kings ********* ADAPTHEALTH LLC: Moody's Confirms Ba3 CFR on AeroCare Transaction ----------------------------------------------------------------- Moody's Investors Service confirmed AdaptHealth, LLC's Corporate Family Rating at Ba3, the Probability of Default Rating at Ba3-PD and the company's senior unsecured note rating at B1. The Speculative Grade Liquidity rating is unchanged at SGL-1. The outlook is negative. The rating actions conclude the review for downgrade which commenced on December 1, 2020. The confirmation of AdaptHealth's ratings reflects Moody's expectations that the company's credit metrics will improve following the acquisition of AeroCare Holdings, Inc. in January 2021 for a total purchase price of approximately $2 billion. Leverage is currently elevated following the acquisition, with Debt/EBITDA-Patient Capital Expenditures in the mid five times, on a pro-forma basis. However, Moody's expects debt/EBITDA-Patient Capital Expenditures will decline below 5 times in the next 12 to 18 months. Governance considerations were material in this rating action. Positive consideration is given to the meaningful amount of equity used to fund the AeroCare acquisition. Approximately $900 million of the $2 billion purchase price was funded with common equity issued to the sellers. Further, in January 2021 AdaptHealth raised approximately $250 million of incremental equity through a stock offering. These actions mitigated the impact of the acquisition on the credit profile. The negative outlook reflects the level of integration risk associated with the AeroCare acquisition as well as other recent acquisitions. AdaptHealth undertook acquisitions in 2020 with cash costs of $791 million. The negative outlook also reflects the risk of future debt financed acquisitions. Given the company's currently elevated leverage, there is limited cushion for the company to deviate from its deleveraging plans. Rating Actions: AdaptHealth, LLC The following ratings were confirmed: Corporate Family Rating, confirmed at Ba3 Probability of Default Rating, confirmed at Ba3-PD Senior unsecured rating, confirmed at B1 (LGD5 from LGD4) The following rating is unchanged: Speculative Grade Liquidity rating at SGL-1 Outlook Action: Outlook revised to Negative from Ratings Under Review RATINGS RATIONALE AdaptHealth's Ba3 Corporate Family Rating reflects the company's scale in the provision of home healthcare equipment and related supplies in the United States with pro-forma revenues exceeding $2 billion. The company benefits from its focus on a broad range of patient needs including sleep, home medical equipment, diabetes and respiratory products, the majority of which relate to chronic medical conditions with high levels of recurring revenues. AdaptHealth is somewhat concentrated in sleep related products which are approximately 38% of pro forma revenue. Following the acquisition of AeroCare, the company benefits from a national platform, as the regional footprints of AdaptHealth and AeroCare were highly complementary. The rating is constrained by the company's aggressive approach to acquisitions, with the closing of the $2 billion acquisition of AeroCare in January 2021 occurring shortly after other significant debt funded acquisitions. The company's leverage is high with debt/EBITDA-Patient Capital Expenditures in the mid five times range following the AeroCare acquisition. Moody's expects debt/EBITDA-Patient Capital Expenditures will fall below 5 times in the next 12 to 18 months. Moody's expects the company will moderate the pace of acquisitions in the near term while the company focuses on integrating AeroCare and other recent acquisitions. The outlook is negative. The negative outlook reflects the integration risks associated with the company's recent acquisitions. At the same time, there is limited capacity for the company to pursue additional debt financed acquisitions while leverage remains elevated. The SGL-1 Speculative Grade Liquidity rating reflects the company's very good liquidity profile. Cash is approximately $100 million, and Moody's expects the company will generate around $150 million of free cash flow (before acquisitions) in the next year. The company has a $250 million revolving credit facility which Moody's expects will remain substantially unused. The company's secured term loan agreements are subject to maximum leverage and minimum fixed charge covenants which have ample headroom. Social considerations are a factor in AdaptHealth's ratings. Medical device companies will generally benefit from demographic trends, such as the aging of the populations. AdaptHealth will also benefit from trends that support greater level of patient care in their homes. That said, increasing utilization may pressure payors, including individuals, commercial insurers or governments to seek to limit use and/or reduce prices paid. AdaptHealth also faces somewhat elevated social risks as more than 40% of its pro-forma revenue is derived from Medicaid and Medicare programs and the company is subject to federal and state regulations related to the reimbursement of its products and services. Many of the products distributed by AdaptHealth are also subject to competitive bid requirements by regulators and could pressure pricing, though this risk is mitigated by the company's diversity by product line. The near term risk is also mitigated by the Center for Medicare & Medicaid Services decision to cancel the 2021 competitive bidding program and its proposal to reimburse all Home Medical Equipment products, with a few specific exceptions, at current rates and to schedule the next round of competitive bidding in 2024. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be upgraded if the company sustains debt/EBITDA below 4 times (after deducting patient equipment capital expenditures from EBITDA) while maintaining a good liquidity profile and a sustained track record of successful acquisition integration. Further diversification by payor, product and geography, and increased scale, would also be positive credit factors over time. Ratings could be downgraded if the company is unable to successfully integrate acquisitions or if financial policies become more aggressive. Quantitatively, ratings could be downgraded if the company sustains debt/EBITDA above 5 times (after deducting patient equipment capital expenditures from EBITDA) or if liquidity erodes. Headquartered in Plymouth Meeting, PA, AdaptHealth is a provider of home healthcare equipment and medical supplies to the home and related services in the United States. The company's products cover a range of products to address chronic conditions such as sleep therapies, oxygen and related therapies in the home and other home medical devices and supplies needed by chronically ill patients with diabetes, wound care, urology, ostomy and nutrition supply needs AdaptHealth services approximately 3 million patients annually in all 50 states through a network of over 500 locations in 46 states on a pro-forma basis. Revenues, pro-forma for recent acquisitions, exceed $2 billion. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. ADMIRAL PROPERTY: Unsecureds to Split At Least $20K in Sale Plan ---------------------------------------------------------------- Admiral Property Group LLC filed a Plan of Liquidation and a Disclosure Statement. According to the Debtor, the treatment of Allowed Claims under the Plan provides a greater recovery for Creditors than that which is likely to be achieved under other alternatives for the reorganization or liquidation of the Debtor. The Debtor currently owns the real property located at 157 Beach 96th Street, Queens, New York ("Property") being developed into a 10 unit residential property until the Debtor ran out of funds to complete the development. The Plan provides for a sale of the Property under the Bid Procedures. Currently, the Debtor has entered into a "stalking horse" contract with Jerry Harary in the amount of $2,150,000. The Property was marketed by Rosewood Realty Group, the Debtor's real estate broker, who obtained the Stalking Horse Contract. After the Court approves the Bid Procedures set forth in the Disclosure Statement, Rosewood will engage in additional marketing to try to solicit "higher or better" offers than the current offer set forth in the Stalking Horse Contract. If no "higher or better" bid is made, then the Property will be sold to the Stalking Horse and the $2,150,000 contract price will be used to fund payments under the Plan. From the Sale Proceeds, the Debtor intends to pay its creditors as proposed by the Plan, with FAC's agreement to fund the Plan Fund from its entitlement to the Sale Proceeds as the senior secured creditor. The Plan Funds will contain sufficient cash to pay Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Claims, and to create a $20,000 fund to pay Unsecured Creditors on a Pro-Rata basis. Class 4 Unsecured Claims totaling $364,860 will receive on the Effective Date either (a) their Pro-Rata share of the Unsecured Creditor Fund or (b) if the Sale Proceeds exceed the aggregate amount of all senior Claims, the remaining Sale Proceeds, if any, after payment in full of all senior Claims including Allowed Administrative Claims (including Professional Fees), Allowed Administrative Tax Claims, Allowed Priority Claims, Allowed Priority Non-Tax Claims, and Allowed Claims in Classes 1 through 3 and reimbursement to FAC for $20,000 for funding the Unsecured Creditors Fund. A copy of the Disclosure Statement dated March 26, 2021, is available at https://bit.ly/3me1t5I About Admiral Property Group LLC Admiral Property Group LLC is a single asset real estate debtor (as defined in 11 U.S.C. Section 101(51B)). On July 31, 2020, an involuntary petition was filed against Admiral Property Group by Metro Mechanical LLC, N&K Plumbing and Heating Corp, and Borowide Electrical Contractors (Bankr. E.D.N.Y. Case No. 20-42826). The petitioning creditors are represented by Joel Shafferman, Esq., at Shafferman & Feldman, LLP. Judge Nancy Hershey Lord oversees the case. Robinson Brog Leinwand Greene Genovese & Gluck P.C. serves as Debtor's legal counsel. AEROCENTURY CORP: To Auction Assets in Bankruptcy ------------------------------------------------- Leslie A. Pappas of Bloomberg Law reports that AeroCentury Corp.'s attorney said the company will sell off 10 aircraft and liquidate its other assets in bankruptcy. Drake Asset Management Jersey Ltd. agreed to place the stalking horse bid in the bankruptcy auction, AeroCentury's attorney, Joseph M. Barry of Young Conaway Stargatt & Taylor, told the bankruptcy court Tuesday, March 30, 2021. Drake, AeroCentury's sole secured lender, offered forgiveness of the $82.3 million it's owed in exchange for the 10 planes, which are collateral for the loan. The bid doesn't include a break-up fee or expense reimbursement, and is subject to better offers at auction, the agreement says. About AeroCentury Corp. AeroCentury Corp. is engaged in the business of investing in used regional aircraft equipment and leasing the equipment to foreign and domestic regional air carriers. The Company's principal business objective is to acquire aircraft assets and manage those assets in order to provide a return on investment through lease revenue and, eventually, sale proceeds. The Company is headquartered in Burlingame, California. AeroCentury Corp. and affiliates JetFleet Holdings Corp. and JetFleet Management Corp. sought Chapter 11 bankruptcy protection (Bankr. D. Del. Lead Case No. 21-10636) on March 29, 2021. Morrison & Foerster LLP and Young Conaway Stargatt & Taylor, LLP are serving as legal advisor, and B Riley Securities, Inc., is serving as financial advisor and investment banker. Kurtzman Carson Consultants is the claims agent, maintaining the page http://www.kccllc.net/aerocentury AL NGPL: Moody's Assigns First Time Ba3 Corporate Family Rating --------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to AL NGPL Holdings LLC, including a Ba3 Corporate Family Rating, a Ba3-PD Probability of Default Rating and a Ba3 rating to its proposed $400 million senior secured term loan due 2028. The rating outlook is stable. There is no change to NGPL PipeCo LLC's (NGPL) Baa3 senior unsecured rating and stable outlook. The proposed term loan will refund to funds managed by ArcLight Capital Partners LLC (ArcLight) a portion of the equity funding used to purchase a stake in NGPL PipeCo LLC, which will result in almost 50 percent debt funding for the acquisition. On March 8, 2021, funds managed by ArcLight purchased a 25 percent stake in NGPL (owner of Natural Gas Pipeline Company of America LLC) from Kinder Morgan, Inc. (KMI, Baa2 stable) and Brookfield Infrastructure Partners L.P. (BIP, a subsidiary of Brookfield Asset Management, Inc., Baa1 stable) for $830 million, leaving KMI and BIP each with 37.5 percent ownership stakes. "The debt at AL NGPL is structurally subordinated to the debt at NGPL and adds to the total amount of debt serviced by NGPL's cash flows," commented James Wilkins, Moody's Vice President. "However, we expect NGPL's transportation and storage, fee-based businesses, which are highly contracted with minimum volume commitments, and AL NGPL's governance rights will support steady, ongoing cash distributions to AL NGPL." Assignments: Issuer: AL NGPL Holdings LLC Probability of Default Rating, Assigned Ba3-PD Corporate Family Rating, Assigned Ba3 Senior Secured Term Loan, Assigned Ba3 (LGD4) Outlook Actions: Issuer: AL NGPL Holdings LLC Outlook, Assigned Stable RATINGS RATIONALE NGPL's Ba3 CFR reflects NGPL PipeCo LLC's (NGPL, Baa3 stable) credit profile offset by AL NGPL's minority ownership and non-operating interest. The rating considers the additional $400 million of debt placed at AL NGPL that is structurally subordinated to NGPL's $2 billion of balance sheet debt. NGPL is highly levered (~ 4.6x debt/EBITDA at September 30, 2020) and AL NGPL's pro forma leverage is higher at 8.3x (calculated using its 25 percent proportional share of NGPL debt and EBTIDA as well as the $400 million of debt at AL NGPL). AL NGPL has no physical assets nor does it generate revenue or cash flow. It is entirely dependent on distributions from NGPL to service its $400 million term loan. Moody's expects NGPL to grow its cash flow with incremental volumes from modest new projects that have recently entered service. Further growth spending will likely be funded with debt at NGPL or contributions from the owners such that distributions are not cut to fund investments. The rating considers the structural subordination, AL NGPL's ownership percentage of NGPL and AL NGPL's governance rights that ensure continued distributions from NGPL. AL NGPL has one of five board seats, but implementation of many actions including a change in the distribution policy requires an 85 percent supermajority that effectively requires AL NGPL's consent to implement. NGPL has a geographically extensive natural gas pipeline network from West Texas and the US Gulf Coast up to the Chicago area serving demand from local gas distribution companies, power plants, and industrial users as well as LNG exporters on the US Gulf Coast. It benefits from a stable fee-based, demand pull business underpinned by long-term contracts with take-or-pay provisions (over one-half are attributable to investment grade rated counterparties). The company had engaged in numerous growth projects, which each individually were of a modest size, but consumed much of its cash flow from operations. Following ArcLight's acquisition of its 25 percent stake, NGPL will either debt finance growth projects or seek contributions from its owners in order to maintain stable distributions sufficient to service the AL NGPL debt. AL NGPL's proposed term loan is rated Ba3, the same level as the Ba3 CFR, reflecting the lack of other material amounts of debt in the liability structure. The term loan has a first priority senior secured lien on all assets of AL NGPL, including the equity interest in the entity that indirectly owns Natural Gas Pipeline of America LLC. Moody's expects AL NGPL to have adequate liquidity through mid-2022. The company will receive quarterly distributions from NGPL that will be used to service its debt and minor operating expenses. It also has a $13 million letter of credit facility used to fund a debt service account that will cover six months of interest and amortization on the senior secured term loan. The term loan, which is due in 2028, has one financial covenant -- a minimum debt service coverage ratio of 1.10x. Moody's expects the company to comply with the covenant through mid-2022. AL NGPL has no revolving credit facility or alternate sources of immediate liquidity. The stable outlook reflects the stable outlook on NGPL's ratings (supported by a strong contracted fee-based business) and Moody's expectation that NGPL's steady cash flow will support consistent distributions to AL NGPL sufficient to cover AL NGPL's debt service requirements. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS AL NGPL's rating could be upgraded if NGPL PipeCo LLC's rating is upgraded. AL NGPL's rating could be downgraded if NGPL PipeCo LLC's rating is downgraded, distributions to AL NGPL decline or debt at AL NGPL materially increases. AL NGPL Holdings LLC (AL NGPL) is a holding company established in connection with the March 2021 purchase by funds managed by ArcLight of a 25 percent stake in NGPL PipeCo LLC. NGPL PipeCo LLC is a holding company that wholly owns Natural Gas Pipeline Company of America LLC, an interstate pipeline regulated by the Federal Energy Regulatory Commission (FERC). NGPL is jointly owned by funds managed by ArcLight (25%), Kinder Morgan, Inc. (37.5%) and Brookfield Infrastructure Partners, LP (37.5%). The principal methodology used in these ratings was Natural Gas Pipelines published in July 2018. ALAMO STRATEGIC: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Alamo Strategic Manufacturing, Inc. 700 N. Saint Mary's St. Suite 700 San Antonio, TX 78205 Chapter 11 Petition Date: March 31, 2021 Court: United States Bankruptcy Court Western District of Texas Case No.: 21-50373 Judge: Hon. Craig A. Gargotta Debtor's Counsel: Allen M. DeBard, Esq. LANGLEY & BANACK, INC. 745 E Mulberry Ave. Suite 700 San Antonio, TX 78212 Tel: (210) 736-6600 Fax: (210) 735-6889 E-mail: adebard@langleybanack.com Estimated Assets: $0 to $50,000 Estimated Liabilities: $1 million to $10 million The petition was signed by Rene H. Sosa, chief executive officer. 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://www.pacermonitor.com/view/IHMUT5I/Alamo_Strategic_Manufacturing__txwbke-21-50373__0001.0.pdf?mcid=tGE4TAMA ANGLIN CULTURED STONE: Seeks to Hire Gellert Scali as Legal Counsel ------------------------------------------------------------------- Anglin Cultured Stone Products, LLC seeks approval from the U.S. Bankruptcy Court for the District of Delaware to hire Gellert Scali Busenkell & Brown, LLC as its legal counsel. The firm's services include: (a) advising the Debtor and preparing all necessary documents; (b) taking all necessary actions to protect and preserve the Debtor's estate during the pendency of its Chapter 11 case; (c) preparing legal papers; (d) advising the Debtor regarding its rights and obligations; (e) appearing before the court; (f) performing all other legal services for the Debtor. The firm's attorneys and paraprofessionals will be paid at these rates: Charles J. Brown, III $460 per hour Associates/Of Counsel $250 to $295 per hour Paraprofessionals $105 to $210 per hour Charles Brown, III, Esq., a partner at Gellert Scali, disclosed in court filings that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Charles J. Brown, III, Esq. Gellert Scali Busenkell & Brown, LLC 1201 N. Orange Street, Suite 300 Wilmington, DE 19801 Tel: (302) 425-5812 Fax: (302) 425-5814 Email: mbusenkell@gsbblaw.com About Anglin Cultured Stone Products Anglin Cultured Stone Products, LLC --https://www.anglinconstruction.com -- is a family-owned and operated small business in Delaware that specializes in residential construction, commercial and industrial construction, and cultured marble manufacturing. It has been serving Delaware, Maryland, Pennsylvania and New Jersey since 2005. Anglin Cultured Stone Products sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Case No. 21-10389) on Feb. 8, 2021. In the petition signed by Stuart L. Anglin, sole member and manager, the Debtor disclosed assets of $100,000 to $500,000 and liabilities of $1 million to $10 million. Judge John T. Dorsey oversees the case. Charles J. Brown, III, Esq., at Gellert Scali Busenkell & Brown, LLC, represents the Debtor as legal counsel. ARCOSA INC: Moody's Assigns First Time Ba2 Corp Family Rating ------------------------------------------------------------- Moody's Investors Service assigned a first time Ba2 Corporate Family Rating and Ba2-PD Probability of Default Rating to Arcosa, Inc., a diversified company focused on infrastructure-related materials and solutions, including construction, engineered steel structures, and transportation markets. Moody's also assigned a Ba2 rating to Arcosa's proposed $400 million senior unsecured notes maturing in 2029. Proceeds from the senior unsecured notes, will be used to repay any borrowings that may be outstanding under the 364-day facility at the closing of this offering, to fund the acquisition of StonePoint Materials and for general corporate purposes. Pro forma for this offering and the StonePoint Materials acquisition Moody's expects Arcosa's debt leverage by year end 2021 (inclusive of Moody's adjustments) to be 2.1x. Assignments: Issuer: Arcosa, Inc. Probability of Default Rating, Assigned Ba2-PD Corporate Family Rating, Assigned Ba2 Senior Unsecured Notes, Assigned Ba2 (LGD4) Speculative Grade Liquidity Rating, Assigned SGL-2 Outlook Actions: Issuer: Arcosa, Inc. Outlook, Assigned Stable RATINGS RATIONALE Arcosa's Ba2 Corporate Family Rating reflects the company's attractive market position as a strong local provider of aggregates and other building materials products across Texas and Oklahoma and its solid position in manufacturing engineered steel structures. In addition, the rating is supported by Moody's expectation for solid secular growth drivers around infrastructure spending and sustainable energy that will benefit the company over the next few years. At the same time, the rating takes into consideration the company's acquisitive nature, evolving business model, and highly cyclical transportation division. In 2021, Moody's projects the transportation segment's revenue to decline by more than 30%. Governance characteristics considered for Arcosa include the company's conservative financial policy with respect to leverage and maintaining financial flexibility. Moody's believes the company will follow a disciplined financial approach, with the expectation of maintaining leverage levels at the company's target of 2.0-2.5x net debt to EBITDA (excluding Moody's adjustments). The stable outlook reflects Moody's expectation that over the next 12 to 18 months, Arcosa will grow its revenue and improve profitability organically and through M&A while maintaining moderate leverage and demonstrating a continued conservative approach to balance sheet management and liquidity. The Speculative Grade Liquidity Rating of SGL-2 reflects that Arcosa will maintain good liquidity. Pro forma for the issuance of $400 million in unsecured notes, Arcosa's liquidity position is supported by approximately $96 million of cash, a $500 million unsecured revolving credit facility, and Moody's expectation that the company will generate significant free cash flow in 2021, which will be used to de-lever its balance sheet. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if: The company achieves larger revenue scale and improves its business profile in each segment while maintaining a conservative financial profile Adjusted debt-to-EBITDA is below 2.5x for a sustained period of time EBIT-to-interest expense is above 6.0x for a sustained period of time Adjusted retained cash flow to net debt is above 25% The company improves its liquidity The rating could be downgraded if: Adjusted debt-to-EBITDA is above 3.5x for a sustained period of time EBIT-to-interest expense is below 5.0x for a sustained period of time The company's liquidity and operating performance deteriorates The principal methodology used in these ratings was Building Materials published in May 2019. Headquartered in Dallas, Texas, Arcosa, Inc. (Arcosa) is a diversified publicly traded company focused on infrastructure related products and solutions with solid market positions in construction, engineered structures, and transportation markets. Arcosa became an independent, publicly traded company (listed on the New York exchange) on November 1, 2018, after it separated out of Trinity Industries. At the time of the separation, Arcosa consisted of some of Trinity's former construction products, energy equipment and transportation products businesses. For the year ended December 31, 2020, Arcosa generated approximately $1.94 billion in revenue. ARETEC GROUP: Moody's Rates New $400M Sr. Unsecured Notes 'Caa2' ---------------------------------------------------------------- Moody's Investors Service assigned a Caa2 rating to Aretec Group, Inc.'s proposed $400 million senior unsecured notes. Aretec plans to use the issuance proceeds to help fund its planned acquisition of Voya Financial Advisors (VFA). Moody's said Aretec's outlook remains unchanged at stable. Moody's has taken the following rating action on Aretec Group, Inc.: Senior unsecured notes, Assigned Caa2 RATINGS RATIONALE Moody's said the Caa2 rating assigned to Aretec's proposed $400 million senior unsecured notes reflects these notes' secondary ranking in Aretec's capital structure, with these proposed notes being structurally subordinate to Aretec's B2-rated first lien senior secured term loan. Moody's uses its Loss Given Default for Speculative-Grade Companies (LGD) methodology to help determine these debt instrument ratings. Moody's said Aretec has a B3 Corporate Family Rating, and this rating reflects its low profitability and debt servicing capacity, but with a strong franchise in the wealth management sector. Aretec plans to use the proceeds from the new notes issuance, together with the $125 million first lien term loan upsize (announced last week), and cash on hand, to fund its previously announced acquisition of certain assets related to the independent financial planning channel of Voya Financial Advisors (VFA) from Voya Financial Inc. Moody's said Aretec also plans to payoff its existing $190 million second lien senior secured term loan. Moody's will withdraw its Caa2 rating of the $190 million second lien senior secured term loan following their repayment and upon the close of the transaction. VFA has around 900 independent financial advisors managing around $40 billion in client assets. Moody's said that the VFA acquisition will raise Aretec's debt by about $335 million, and will result in a proforma Moody's-adjusted debt/EBITDA of around 7.5x, compared with Aretec's existing 6.6x Moody's-adjusted debt leverage at December 2020. Moody's expects Aretec's experienced management team to successfully integrate the VFA business, and to benefit from the cultural similarities of the respective businesses and their common technology infrastructure and clearing arrangements, with these factors offering the prospect of strong advisor retention and engagement, a credit positive. Aretec's stable outlook reflects Moody's expectation that despite the increase in debt leverage associated with the VFA acquisition, the firm's experienced leadership team will successfully execute the integration and will be able to improve its Moody's-adjusted leverage to about 7x within a year from the close of the transaction. The stable outlook also reflects Aretec's stabilizing financial advisor base and client assets levels, and the firm's improving liquidity position, that resulted from management's swift cost-cutting and efficiency improvements in reaction to pandemic-driven disruptions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Aretec's ratings could be upgraded should it drive a significant improvement in Moody's- adjusted debt leverage to below 6.5x. A significant expansion of existing revenue streams, or development of new ones, resulting in a sustainable increase in revenue diversification and less reliance on the macroeconomic environment, could also results in upward rating pressure. Also, strong advisor recruitment and improved advisor retention rates leading to growth in client assets and a sustainable improvement in profitability could also drive an upgrade. Moody's said Aretec's ratings could be downgraded should it become clear that Moody's-adjusted debt leverage will remain sustained around or higher than 7.5x following the VFA acquisition. A deterioration in revenue following a severe financial markets correction, not offset by flexible expense management, resulting in a Moody's-adjusted interest coverage ratio below 1x, could also result in a downgrade. Also, a significant decline in the number of financial advisors or a deterioration in advisor retention levels could drive downward rating pressure. The principal methodology used in this rating was Securities Industry Service Providers Methodology published in November 2019. ATHLETICO HOLDINGS: Moody's Alters Outlook on B2 CFR to Stable -------------------------------------------------------------- Moody's Investors Service changed Athletico Holdings, LLC's outlook to stable from negative and affirmed its B2 Corporate Family Rating and B2-PD Probability of Default Rating. At the same time, Moody's affirmed the B1 ratings on Athletico's senior secured first lien credit facilities at a subsidiary level. The stabilization of the outlook reflects Athletico's return of patient volumes to near pre-coronavirus levels, which is likely to continue to improve as the coronavirus pandemic eases. At the same time, Moody's anticipates that Athletico will generate positive free cash flow and will prioritize its future cash flow toward its growth strategy while maintaining profitability. The affirmation of the B2 CFR reflects the company's very good liquidity but moderately high financial leverage. Athletico's adjusted debt/EBITDA approximated 6.7x for the twelve months ended September 30, 2020. This level of leverage, along with the company's ability to reduce variable costs and growth capital expenditures if necessary, positions the company well to deleverage below 6.0x in 2021. Moody's took the following rating actions: Issuer: Athletico Holdings, LLC Corporate Family Rating, affirmed at B2 Probability of Default Rating, affirmed at B2-PD Issuer: Athletico Management, LLC and Accelerated Health Systems, LLC as co-borrowers GTD Senior Secured 1st lien revolving credit facility expiring 2023, affirmed at B1 (LGD3) GTD Senior Secured 1st lien term loan due 2025, affirmed at B1 (LGD3) Outlook Actions: Issuer: Athletico Holdings, LLC Outlook, Changed To Stable From Negative RATINGS RATIONALE Athletico's B2 Corporate Family Rating reflects its high financial leverage and geographic concentration in the mid-western region of the US. The rating also reflects the relatively low barriers to entry in the physical therapy business and the risk of market oversaturation given the rapid expansion of Athletico and many of its competitors. The rating also incorporates risks associated with the company's rapid expansion strategy as it grows, both organically and through acquisitions. The rating is supported by Athletico's track record of growth and solid free cash flow given low capital expenditure needs. Additionally, Athletico has some ability to conserve liquidity by reducing new clinic openings. Moody's expects that demand for physical therapy will continue to grow given it is relatively low-cost and can prevent the need for more expensive treatments. Moody's considers Athletico to have very good liquidity, supported by the company's approximately $31 million of cash as of September 30, 2020, full availability on the $100 million revolver. The company generates positive free cash flow, and has been able to conserve liquidity by reducing new office openings and growth capital expenditures. Moody's anticipates that Athletico will generate about $30 million in free cash flow in 2021, as the company returns to growth. Moody's considers coronavirus to be a social risk given the risk to human health and safety. Aside from coronavirus, Athletico faces other social risks such as the rising concerns around the access and affordability of healthcare services. However, Moody's does not consider the physical therapy providers to face the same level of social risk as many other healthcare providers. Further, Athletico benefits from positive social considerations, as physical therapy can be a less expensive and a safer alternative to surgery or opioid usage. From a governance perspective, Moody's expects Athletico's financial policies to remain aggressive due to its private equity ownership. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be downgraded if the company's liquidity weakens or if adjusted debt/EBITDA will remain above 6.0x for a sustained period of time. Additionally, if the company fails to effectively manage its rapid growth or the company pursues more aggressive financial policies, the ratings could be downgraded. Ratings could be upgraded if Athletico materially increases its size and scale and demonstrates stable organic growth at the same time it effectively executes on its expansion strategy. Additionally, adjusted debt/EBITDA sustained below 4.5 times could support an upgrade. Athletico Holdings, LLC, headquartered in Oak Brook, IL, is a provider of outpatient rehabilitation services - primarily physical therapy. Through its subsidiaries, it operates about 525 clinics in 12 states, with a strong presence in the mid-western US. The company also has about 44 management service agreements with large physician groups or hospitals to provide physical therapy services. Revenues are approximately $420 million as of September 30, 2020. Athletico is owned by BDT Capital Partners, LLC. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. BWX TECHNOLOGIES: Moody's Rates New Unsecured Notes Due 2029 'Ba3' ------------------------------------------------------------------ Moody's Investors Service assigned a Ba3 rating to BWX Technologies, Inc.'s ("BWXT") new senior unsecured notes due 2029. The issuance does not impact other ratings of BWXT, including the existing Ba2 Corporate Family Rating and the Ba3 ratings on the company's existing senior unsecured notes. The ratings outlook is stable. RATINGS RATIONALE BWXT's Ba2 Corporate Family Rating reflect the company's unique position as the sole source provider of nuclear propulsion systems to US Naval submarines and aircraft carriers, with production plans well extended into the 2050s and a sizable backlog that provides good long-term revenue visibility. The company generates relatively strong and stable operating margins in excess of 16%, which moderates the company's leverage, with debt-to-EBITDA maintained in the mid 2x range. However, the high levels of investment required for the company's operations results in thin and sometimes negative free cash flow. This limits the company's ability to reduce debt or undertake acquisitions to grow and diversify without increasing debt. The stable ratings outlook reflects Moody's expectation that BWXT will continue to benefit from a US budgetary setting that has a keen focus on shipbuilding. As a result, Moody's expect mid-to-high single-digit revenue growth annually and EBITA margins maintained at close to 17% through 2022. Planned capital investments in the Nuclear Operations Group (NOG) segment and increased working capital usage will lead to negative or close to breakeven free cash flow in 2021 and 2022 before turning positive in 2023. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be upgraded if the company successfully executes investment to gain scale, with increasing clarity to the company's strategic focus as it grows. Moody's would deem a strategy that focuses on increasing service to principal customers as less risky than one that seeks to diversify by acquiring businesses outside of its current core competencies. An upgrade would also be supported by the demonstration of consistent margins of nearly 20% and strong free cash flow , with little additional integration risk or business restructuring made necessary from a changing portfolio of operations. Debt-to-EBITDA sustained in the low 2x range would also support an upgrade. Ratings could be downgraded in the event of a material increase in debt to finance an accelerated pace of acquisitions or to increase its share repurchase program. A downgrade would also be warranted by weakening liquidity, with expectations for negative free cash flow beyond 2022 due to an extended period of increased capital investment, with heavy reliance on the revolver to fund capex. Deterioration in credit metrics such as EBITA margins below 10% or debt-to-EBITDA sustained above 3x would also support lower ratings The following summarizes the rating actions: Assignments: Issuer: BWX Technologies, Inc. Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD4) BWX Technologies, Inc., headquartered in Lynchburg, VA, is a specialty manufacturer of nuclear components, primarily serving the US Navy. The company also participates in the commercial nuclear sector in Canada, as well as nuclear technology services to the government and commercial sectors. Revenues are approximately $2.1 billion. The principal methodology used in this ratings was Aerospace and Defense Methodology published in July 2020. CASTEX ENERGY: Seeks Approval to Hire Claro Group, Appoint CRO -------------------------------------------------------------- Castex Energy 2005 Holdco, LLC and its affiliates seek approval from the U.S. Bankruptcy Court for the Southern District of Texas to employ The Claro Group, LLC and appoint Douglas Brickley, the firm's managing director, as their chief restructuring officer. The firm's services include: a. assistance in the review of reports or filings as required by the court or the U.S. trustee, including, but not limited to, schedules of assets and liabilities, statements of financial affairs, and monthly operating reports; b. review of the Debtors' financial information, including, but not limited to, analyses of cash receipts and disbursements, financial statement items and proposed transactions for which court approval is sought; c. review and analysis of the reporting regarding cash collateral and any debtor-in-possession financing arrangements and budgets; d. review of any potential cost containment opportunities proposed by the Debtors; e. review of any potential asset redeployment opportunities proposed by the Debtors; f. review and analysis of assumption and rejection issues regarding executor contracts and leases; g. review and analysis of the Debtors' proposed business plans and the business and financial condition of the Debtors generally; h. assistance in evaluating reorganization strategy and alternatives available, including any asset sale transactions; i. review and analysis of the Debtors' financial projections and assumptions; j. review and analysis of enterprise, asset and liquidation valuations; k. assistance in preparing documents necessary for confirmation of any plan, proposed asset sales, and proposed use of cash or financing; l. assistance to the Debtors in negotiations and meetings with creditors and other parties-in-interest; m. review and analysis of the potential tax consequences to the bankruptcy estates of any reorganization or proposed transactions; n. assistance with the claims resolution procedures including, but not limited to, analyses of creditors' claims by type and entity; o. forensic accounting and litigation consulting services and expert witness testimony; and p. other such functions as requested by the Debtors to assist in their Chapter 11 cases. Claro Group will be paid at these rates: Managing Directors $500 to $600 per hour Directors/Senior Advisors $395 to $495 per hour Managers/Sr. Managers/Advisors $300 to $385 per hour Analysts/Senior Consultants $200 to $295 per hour Admin $125 to $175 per hour The firm will also be reimbursed for reasonable out-of-pocket expenses incurred. The retainer fee is $50,000. Mr. Brickley disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Douglas J. Brickley The Claro Group, LLC 711 Louisiana Street, Suite 2100 Houston, TX 77002 Tel: (713) 454-7730 Fax: (713) 236-0033 About Castex Energy 2005 Holdco Castex Energy 2005 Holdco, LLC and its affiliates, Castex Energy 2005, LLC, Castex Energy Partners, LLC, and Castex Offshore, Inc., sought protection under Chapter 11 of the Bankruptcy Code on Feb. 26, 2021 (Bankr. S.D. Texas Lead Case No. 21-30710) on Feb. 26, 2021. At the time of the filing, the Debtors disclosed assets of between $100 million and $500 million and liabilities of the same range. Judge David R. Jones oversees the cases. The Debtors tapped Okin Adams LLP as their bankruptcy counsel, The Claro Group, LLC as their financial advisor, and Thompson & Knight LLP as special counsel and conflicts counsel. Donlin, Recano & Company, Inc. is the notice, claims and balloting agent. CHAMP ACQUISITION: Moody's Alters Outlook on B2 CFR to Stable ------------------------------------------------------------- Moody's Investors Service affirmed Champ Acquisition Corporation's Corporate Family Rating at B2 and Probability of Default Rating at B2-PD. Champ is the parent company of Jostens, Inc. At the same time, Moody's affirmed the B1 rating for the company's senior secured first lien credit facilities, consisting of a $150 million first lien revolver due 2023 and a $775 million principal amount first lien term loan due 2025, and also affirmed the Caa1 rating for the company's $150 million senior secured second lien term loan due 2026. The rating outlook was changed to stable from negative. The ratings affirmations and change to a stable outlook reflects the company's better than anticipated free cash flows during a challenging fiscal 2020, and Moody's expectations for topline and earnings recovery in fiscal 2021 that will reduce leverage. Champ's revenue declined -10% in fiscal 2020 versus the prior year, with flat yearbook sales more than offset by sales declines in its scholastic and college/pro segments. However, the company's free cash flows remained stable supported by strong cost controls and lower capital expenditures. Moody's expects revenue and earnings growth will benefit from continued stable yearbook sales, and a gradual recovery in scholastic and college/pro related products over the next 12-18 months, supported by a recovering US economy and schools reopening throughout 2021. In addition, Moody's anticipates the $44 million of business transformation and other costs incurred in 2020 related to the coronavirus will moderate in 2021. As a result, Moody's projects debt/EBITDA leverage will decline to around 4.3x and for free cash flows in the range of $60 million over the next 12-18 months. The following ratings/assessments are affected by the action: Ratings Affirmed: Issuer: Champ Acquisition Corporation Corporate Family Rating, Affirmed B2 Probability of Default Rating, Affirmed B2-PD GTD Senior Secured 1st Lien Term Loan, Affirmed B1 (LGD3) GTD Senior Secured 1st Lien Revolving Credit Facility, Affirmed B1 (LGD3) GTD Senior Secured 2nd Lien Term Loan, Affirmed Caa1 (LGD5) Outlook Actions: Issuer: Champ Acquisition Corporation Outlook, Changed To Stable From Negative RATINGS RATIONALE Champ's B2 CFR credit profile broadly reflects the company's high financial leverage with debt/EBITDA at 6.2x as of fiscal year end December 31, 2020. The company has a narrow product focus in school related affinity products including yearbooks, school rings, graduation gowns, and related products. Products such as class rings and yearbooks are steadily declining and there is risk to certain products from online tools that can be used to share photographs and other information. Schools across the U.S. remain partially closed to in-person instruction due to the coronavirus outbreak and efforts to avoid large gatherings may result in graduation ceremony cancelations or restrictions. A prolonged high unemployment rate is also likely to weaken discretionary consumer spending. Competitive and market risks are partially mitigated by the breadth and quality of Champ's product and service capabilities, the company's ability to personalize products, strong sales support and customer service, and the long-standing relationships of the company's large network of independent sales representatives with individual schools and colleges. The company's adequate liquidity reflects Moody's expectations for free cash flow in the $60 million range over the next 12 months, and access to an undrawn $150 million revolver due 2023, which provides financial flexibility to fund near term working capital seasonality and the annual term loan amortization of approximately $39 million. However, because Champ's modest cash of $3.2 million at the end of fiscal 2020, the company will need to increase free cash flow from the $29 million produced in 2020 to fund required term loan amortization without having to draw on the revolver aside from normal seasonal needs. This could prove challenging if the operating demand for school affinity products remains soft, capital expenditures increase more than anticipated or restructuring and other coronavirus related costs do not fall as much as projected. Governance factors primarily relate to the company's aggressive financial policies under private equity ownership, including its high financial leverage and the inherent risks of activities such as shareholder distributions. The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of Champ from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectations that Champ's revenue and earnings will gradually recover in fiscal 2021 with the company generating annual free cash flow in the $60 million range that will cover the high annual term loan amortization of approximately $39 million, and resulting in debt/EBITDA declining to around 4.3x by the end of 2021. Ratings could be upgraded if the company increases its revenue scale, demonstrates consistent organic revenue growth and operating margin expansion, while debt/EBITDA is sustained below 4.0x. A ratings upgrade would also require the company to maintain at least good liquidity, and Moody's to expect financial policies that support credit metrics at the above levels. Ratings could be downgraded if the company's revenue and earnings do not recover as expected, debt/EBITDA is sustained above 5.5x, or if liquidity weakens. Failure to generate free cash flow sufficient to meet required term loan amortization or the revolver is drawn more than expected beyond normal seasonal needs could result in a downgrade. Ratings could also be downgraded if financial policies become more aggressive, including undertaking a large debt-financed acquisition or dividend distribution that materially increases financial leverage before earnings have recovered. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. Headquartered in Minneapolis, MN, Champ Acquisition Corporation owns Jostens, which is a manufacturer and seller of yearbooks, publications, jewelry, and other school-related affinity products that serve the K--12 educational, college, and professional sports segments. The company was acquired by private equity firm Platinum Equity in December 2018 from Newell Brands for approximately $1.1 billion, and revenue in fiscal year end December 31, 2020 was $686.5 million. CIELO VISTA: US Trustee Opposes Amended Disclosure Statement ------------------------------------------------------------ The United States Trustee is asking the U.S. Bankruptcy Court for the District of New Mexico to deny approval of the Amended Disclosure Statement in support of Cielo Vista Hospitality, LLC's Liquidating Plan unless and until amended or modified. In its objection, the U.S. Trustee points out that: * The Disclosure Statement refers to "the Plan's proposed treatment of Classes 3 and 4, which contains general unsecured claims against the Debtor". However, the table directly below that refers to Class 1 (General Unsecured Claims (Non-Insiders). Similarly, the column labeled "Treatment" in Article IV of the Plan states that "Class 4 consists of all unsecured claims. Class 4 will be paid after Class 3 is paid in full." However, the column labeled "Class #" of the same table refers to Class 1. The United States Trustee objects to these provisions as it is inconsistent and confusing. * The Disclosure Statement and the Plan do not provide a dollar amount of the general unsecured claims. The Monthly Operating Reports ("MORs") are delinquent. Certain past due reports were filed Feb. 23, 2021 after the United State Trustee filed a Notice of Noncompliance. However, the MORS for December 2020, January 2021 and February 2021 have not been filed. * In the Disclosure Statement, the Debtor asserts that "No claims have been filed by any creditor in the case to date." That was true at the time of the filing of the Plan. However, since the filing of the plan, proofs of claim have been filed, including proofs of claim filed on behalf of Five Star Hospitality Management, Inc., Prestige Hospitality Management Inc. and Hitendra Bhakta on March 19, 2021. It is unknown whether the claims will be paid or not and, because the Plan proposes that Mr. Bhakta retains his ownership of Debtor, whether the treatment of the claims will result in a violation of the absolute priority rule. * The Disclosure Statement states that "Claims will be paid by Hitendra Bhakta, one of his non-debtor entities, or through recovery of the escrowed funds if Debtor prevails in the adversary proceeding against CPLG." However, there is no indication of whether those entities have funds sufficient to pay the claims. About Cielo Vista Hospitality Cielo Vista Hospitality, LLC was incorporated in January of 2020 under the laws of the State of New Mexico. It is a single-member limited liability company owned by Hitendra Bhakta. Cielo Vista is a single-use entity created to purchase a motel property in El Paso, Texas. The Debtor sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.N.M. Case No. 20 10877) on April 29, 2020, listing under $1 million in both assets and liabilities. Michael K. Daniels, Esq., represents the Debtor. CONSOL ENERGY: Moody's Rates New $75MM Secured Bonds 'Caa1' ----------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to CONSOL Energy Inc.'s proposed $75 million tax-exempt secured bond offering. The bonds will be issued by the Pennsylvania Economic Development Financing Authority, guaranteed by CONSOL Energy Inc., and benefit from a second lien secured position on certain assets. Proceeds will be used to fund expenses related to solid waste disposal facilities at the company's Pennsylvania Mining Complex ("PAMC"). Moody's also affirmed all long-term ratings for CONSOL, including the B2 Corporate Family Rating, B2-PD Probability of Default Rating, and Caa1 senior secured second lien notes. Moody's revised the rating outlook to stable from negative. "The proposed tax-exempt offering will strengthen liquidity and the company demonstrated resilience during an exceptionally difficult year in 2020," said Ben Nelson, Moody's Vice President -- Senior Credit Officer and lead analyst for CONSOL Energy, Inc. Assignments: Issuer: Pennsylvania Economic Dev. Fin. Auth. Gtd Senior Secured Revenue Bonds, Assigned Caa1 (LGD5) Affirmations: Issuer: CONSOL Energy Inc. Corporate Family Rating, Affirmed B2 Probability of Default Rating, Affirmed B2-PD Senior Secured Regular Bond/Debenture, Affirmed Caa1 (LGD5) Withdrawals: Issuer: Pennsylvania Economic Dev. Fin. Auth. Gtd Senior Unsecured Revenue Bonds, Previously Rated Caa2 (LGD6) Outlook Actions: Issuer: CONSOL Energy Inc. Outlook, to Stable from Negative RATINGS RATIONALE The Caa1 rating assigned to the proposed tax-exempt bonds reflects the secured status of the bonds and contractual subordination to the company's first lien secured debt obligations. The rating remains subject to Moody's review of the final terms and conditions of the proposed offering. Moody's expects management-adjusted EBITDA near $275 million and meaningful free cash flow in 2021. The rating incorporates an expectation that the company will use free cash flow to facilitate overall debt reduction before its next debt maturities in 2023 ($66 million Term Loan A; undrawn $400 million revolving credit facility) and 2024 ($269 million Term Loan B). The quantum of debt reduction is an important consideration to the rating and outlook in light of significant ongoing pressure on the thermal coal industry and access to capital for thermal coal producers. Management has undertaken numerous actions to enhance the company's liquidity position in response to the disruption of the thermal coal industry following the global outbreaks of Coronavirus in early 2020. These actions include: (i) operational adjustments, including cost control measures and temporarily idling the Enlow Fork Mine; (ii) adjustments to the company's existing financial arrangements, including relaxation of financial maintenance covenants under the revolving credit facility, execution of sale leasebacks, and extension of a securitization agreement; (iii) various completed and pending asset sales, including land and mineral assets, gas wells, and coal reserves; and (iv) a completing a transaction to eliminate a master-limited partnership, which eliminated cash outflows and improved the cushion of compliance under financial maintenance covenants. These factors helped preserve cash flow generation and enhance liquidity, contributing to a stabilization of the company's rating outlook. The SGL-3 reflects adequate liquidity to support operations over the next 12-18 months. Moody's expects that the company will generate positive free cash flow in 2021. The company reported $51 million of cash and $274 million of availability under an undrawn $400 million revolving credit facility due 2023 at December 31, 2020. Availability under the revolving credit facility is reduced by $126 million of letters of credit to support various obligations. The credit agreement also contains financial maintenance covenants, including Net Debt/EBITDA, Gross First Lien Debt/EBITDA, and Fixed Charge Coverage ratio tests. Moody's expects that the company will have an adequate cushion of compliance under these covenants. Moody's also believes that investor concerns about the coal industry's ESG profile are intensifying and coal producers will be increasingly challenged by access to capital issues in the early 2020s. An increasing portion of the global investment community is reducing or eliminating exposure to the coal industry with greater emphasis on moving away from thermal coal. The aggregate impact on the credit quality of the coal industry is that debt capital will become more expensive over this horizon, particularly in the public bond markets, and other business requirements, such as surety bonds, which together will lead to much more focus on individual coal producers' ability to fund their operations and articulate clearly their approach to addressing environmental, social, and governance considerations -- including reducing net debt in the near-to-medium term. CONSOL reported about $665 million of debt and $652 million of surety bonds (up from $618 in 2019) to support employer-related and reclamation-related items at December 31, 2020. CONSOL's B2 CFR is supported by a solid contract position and aggressive efforts to preserve liquidity. CONSOL's business position is also enhanced by its low-cost longwall mines, relatively stable customer base, and good access to export markets for both thermal and metallurgical coals. Despite the company's good business position, CONSOL is fairly concentrated compared to other coal companies with reliance on a single mining complex with three operating coal mines for the majority of its earnings and cash flow. Four out of five longwalls are currently operational. An additional longwall is idled at present. CONSOL also has meaningful legacy liabilities consistent with many rated coal companies, though it has reduced this position significantly following the sale of certain assets and managing cash servicing costs. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects expectations for improving coal production and positive free cash flow. Moody's could upgrade the rating with better visibility into the demand for thermal coal, expectations for at least $50 million of free cash flow sustained on an annual basis, and adjusted financial leverage sustained below 3.0x, and good liquidity to support operations. An upgrade likely would require meaningfully lower absolute debt levels. Moody's could downgrade the rating with expectations for adjusted financial leverage above 3.75x, negative free cash flow, substantive deterioration in liquidity, or further intensification of ESG concerns that call into question the company's ability to handle upcoming financing requirements or access capital markets on economic terms. Environmental, social, and governance factors have a material impact on CONSOL's credit quality. The company is exposed to ESG issues typical for a company in the coal mining industry, including increasing global demand for renewable energy that is detrimental to demand for coal, especially in the United States and Western Europe. From an environmental perspective the coal mining sector is also viewed as: (i) very high risk for air pollution and carbon regulations; (ii) high risk for soil and water pollution, land use restrictions, and natural and man-made hazards; and (iii) moderate risk for water shortages. Social issues include factors such as community relations, operational track record, and health and safety issues associated with coal mining, such as black lung disease. CONSOL is highly exposed to thermal coal. Moody's believes that thermal coal carries greater ESG-related risks than metallurgical coal. Specific risks for CONSOL Energy include meaningful exposure to thermal coal and potential negative political actions in areas served by the company. CONSOL's actions and commentary since becoming an independent company have been more oriented toward debt reduction than many other coal companies. The principal methodology used in these ratings was Mining published in September 2018. CONSOL Energy Inc. is a leading global pure-play coal producer operating the Pennsylvania Mining Complex ("PAMC") located in the Northern Appalachia coal basin. The company generated $1 billion in revenues in 2020. CONTINENTAL COIFFURES: Unsecured Creditors to Recover 3% in Plan ---------------------------------------------------------------- Continental Coiffures, Ltd., filed an Amended Small Business Plan of Reorganization under Subchapter V of 11 U.S.C. Sec. 1190. The Plan proposes to pay the Debtor's creditors from cash flow from operations and future income generated by its continuing business operations. The Debtor's business operations as a salon, personal care, and retail business have encountered significant financial setbacks through the course of the COVID-19 pandemic and due to the implementation of (and its strict compliance with) the Shutdown Order and subsequent related governmental restrictions and directives. Notwithstanding the negative economic effects of the governmental restrictions and limitations that it has experienced, the Debtor has been able to continue operating as a debtor in possession under the Code, continuing its strong business reputation and its going concern value. Additionally, the Debtor has taken the opportunity through this case to vacate one of its previously under-performing (and highly priced) leased business locations and as otherwise set forth in this Plan, to reject that previous unexpired lease. The Debtor vacated that SH Village Location prior to the Petition Date but has been able to transition its business operations to a single larger and much more affordable business location, while retaining substantially all of its pre-petition employees. With the exception of those holding General Unsecured Claims (chief among them the rejected landlord of the Debtor's previous SH Village Location), the Debtor proposes through this Plan to pay all of its other outstanding debt in full. Under the Plan, Class 1 Administrative Claims, Class 2 Priority Claims, Class 3 Secured Claims, and Class 5 Equity Interest Holders are unimpaired. Class 5 General Unsecured Claims are impaired. The Debtor estimates approximately 3 percent will be paid on account of Allowed General Unsecured Claims pursuant to the Plan. Each holder of any such Allowed General Unsecured Claim will receive its pro-rata share of the proceeds available to Debtor for payment of such claims after payment of all allowed claims that are senior in priority to such Allowed General Unsecured Claims. A full-text copy of the Amended Plan is available at https://bit.ly/3rHdeTg from Pacermonitor.com at no charge. Counsel to the Debtor: Jason L. Ott JACKSON KELLY PLLC 501 Grant Street Suite 1010 Pittsburgh, PA 15219 Phone: 412-434-7617 E-mail: jason.ott@jacksonkelly.com. About Continental Coiffures Ltd. Continental Coiffures, Ltd., a McMurray, Pa.-based hair and styling salon company, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Pa. Case No. 20-22808) on Sept. 29, 2020. At the time of the filing, the Debtor disclosed $100,001 and $500,000 in both assets and liabilities. Jackson Kelly PLLC and Colleran & Company, CPA PC serve as the Debtor's legal counsel and accountant, respectively. CORELOGIC INC: Moody's Assigns 'B2' CFR & Rates New Term Loan 'B1' ------------------------------------------------------------------ Moody's Investors Service assigned CoreLogic, Inc. (New) (aka Celestial-Saturn Merger Sub Inc. and together with CoreLogic, Inc., "CoreLogic") a B2 corporate family rating and a B2-PD probability of default rating, while rating its proposed senior secured 1st lien revolver and term loan at B1 and senior secured 2nd lien term loan at Caa1. The outlook is stable. The rated debt and equity from affiliates of Stone Point Capital LLC and Insight Partners will fund the acquisition of 100% of the common stock of CoreLogic, Inc. in a go-private transaction, as well as pay related fees and expenses. The existing ratings at CoreLogic, Inc. will be withdrawn when the currently-rated debts are repaid. Following the close of the transaction, CoreLogic, Inc. (New) will be merged into CoreLogic, Inc. and become the borrower. RATINGS RATIONALE The B2 CFR reflects high financial leverage above 7 times, but good interest coverage above 2 times and free cash flow to debt around 5%, expected in 2021. Financial leverage is expected to return to below 7 times by 2022, incorporating Moody's expectation for rapid and substantial debt repayment from free cash flow over the next 2 or more years. A very large nearly $3.5 billion sponsor equity contribution provides strong evidence to support our assessment of current enterprise value well in excess of the amount of the rated debt. All financial metrics cited reflect Moody's standard adjustments. Rating support is provided by stable and predictable business lines providing "must have" data and services to banks, insurance companies and the residential real estate industry. A somewhat narrow market focus leads to some customer concentration, but with high quality financial institutions. Tailwinds from favorable mortgage market conditions in 2021 and very low interest rates drive Moody's anticipation of substantial free cash flow available to repay debt. Revenue is expected to decline after 2021 given the strength of the current mortgage boom is likely to fade and certain mature businesses are in long term revenue decline. M&A and shareholder returns will compete for cash flow, so further borrowing is possible. The company will remain a cash tax payer despite the high debt burden. Interest rate risk from an all floating rate capital structure will be mitigated by a hedging strategy converting the interest obligations to fixed rates. CoreLogic's unique data and strong market position within the mortgage settlement services market is supported by long-standing relationships with many of the largest financial institutions. Moody's considers revenue and cash flow generally predictable. The company maintained solid financial performance through the 2020 and 2008/2009 economic cycles and during the years between, including years when mortgage originations declined or were weak. As CoreLogic's financial results reflect mortgage industry conditions, Moody's considers the company cyclical. Moody's expects some revenue declines in 2021, reflecting still solid home sale market conditions expected to remain supportive, aided by historically low mortgage interest rates, but also that the very high levels of mortgage financing activity in the past year are likely to abate. Adverse market conditions, including a more challenging housing market, regulatory scrutiny and rising interest rates, could develop and weigh on operating results. These pressures will be mitigated somewhat by growing demand for property intelligence and data analytics solutions, increasing regulation and compliance requirements, pricing increases and market share gains arising from the mortgage lending/servicing industry trend towards outsourcing. As a data and analytics service provider, CoreLogic does not have a material or unusual environmental impact. Certain of the products and services it offers can be used in the production of real estate related environmental impact analysis by their customers. Reputational risks surrounding data security, completeness and correctness are important social risks for CoreLogic. A loss of confidence by its customers in its data security and related matters could severely diminish its reputation. The loss of reputation could lead to customer losses, declining pricing power and encourage investment by competitors and new market entrants. The company invests in its data security that optimizes security versus threats. The company has never reported a large data security breach. As a private company owned by financial sponsors, CoreLogic's financial strategies are expected to be aggressive and opportunistic. The board of directors is controlled by Stone Point and Insight Partners. Among CoreLogic's expected near term capital allocation priorities are investing in the business, completing product-focused acquisitions, financial leverage reduction and cash returns to shareholders. Moody's considers CoreLogic's liquidity profile as good. CoreLogic is expected to maintain around $100 million of cash to ease the company's exposure to the housing industry cycle. Moody's also projects annual free cash flow of more than $200 million in 2021 and $300 million in 2022. There are $40 million of annual required amortization payments on the senior secured 1st lien term loan, payable quarterly. CoreLogic's undrawn $500 million revolver provides substantial external liquidity. The revolver is subject to compliance with a maximum 8.65x First Lien Net Leverage ratio applicable only when 35% drawn at quarter end. Moody's expects CoreLogic would maintain compliance with its financial covenant if it were measured for at least the 12 to 15 months. There are no financial covenants applicable to the term loans. The ratings assigned to the individual instruments are based on the probability of default of the company, reflected in the B2-PD PDR, as well as a family recovery of 50% of debt obligations assumed at default. The B1 (LGD3) rating assessment for the senior secured first lien credit facilities reflect their senior most ranking within the capital structure and first loss support provided by senior secured second lien term loan and unsecured claims. These facilities are secured on a first lien basis by substantially all assets and by the stock of the company's material domestic subsidiaries, which hold the vast majority of CoreLogic's assets. The credit facilities are further supported by upstream guarantees from the material domestic subsidiaries. The Caa1 (LGD6) rating assessment for the senior secured second lien credit facilities reflect their senior most ranking within the capital structure and first loss support provided by senior secured second lien term loan and unsecured claims. The stable outlook reflects Moody's expectations for low single digit revenue declines, EBITDA margins of over 33% and debt to EBITDA to fall below 7 times through the application of CoreLogic's substantial free cash flow to debt repayment. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Moody's expects 1) debt to remain under 6.0 times; 2) free cash flow above 6.0% of total debt; 3) balanced financial policies; and 4) good liquidity. The ratings could be downgraded if 1) revenue visibility or EBITA margins become pressured by increased competition, regulatory changes or other factors; 2) debt to EBITDA leverage is expected to remain above 7.0 times; 3) free cash flow to debt is anticipated below 3.0%; 4) liquidity deteriorates; or 5) CoreLogic pursues aggressive shareholder-friendly financial policies, including debt-funded acquisitions or shareholder returns. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Issuer: Corelogic, Inc. (New) Corporate Family Rating, Assigned B2 Probability of Default Rating, Assigned B2-PD Gtd Senior Secured 1st Lien Multi-Currency Revolving Credit Facility, Assigned B1 (LGD3) Gtd Senior Secured 1st lien Term Loan, Assigned B1 (LGD3) Gtd Senior Secured 2nd Lien Term Loan, Assigned Caa1 (LGD6) Outlook is Stable CoreLogic provides property and mortgage data and analytics, as well as loan processing and other services. Moody's expects 2021 revenues (including from discontinued operations) of about $2 billion. CRESTWOOD EQUITY: Moody's Alters Outlook on Ba3 CFR to Stable ------------------------------------------------------------- Moody's Investors Service changed Crestwood Equity Partners LP's (Crestwood) and Crestwood Midstream Partners LP's (Midstream) outlooks to stable from negative. At the same time, Moody's affirmed Crestwood's Ba3 Corporate Family Rating, Ba3-PD Probability of Default Rating and the B2 rating on its Class A Preferred Units. Moody's also affirmed Midstream's B1 senior unsecured notes rating. The actions follow the company's announcement [1] that it will purchase approximately 11.5 million of its common units and the general partner interest from Crestwood Holdings (Holdings, Caa1 negative) for $268 million in cash. Combined with a separate transaction in which First Reserve, Holdings' owner, sold its remaining Crestwood units through a private placement to a group of investors for $132 million, First Reserve and Holdings will no longer have an ownership interest in Crestwood. These transactions will fully repay and remove Holdings' $328 million Holdco Term Loan from Crestwood's credit profile and eliminate the implicit debt service burden for this loan on Crestwood. The outlook change also reflects Moody's expectation that the company will be able to reduce leverage in 2021 through significant free cash flow generation, partially offsetting borrowings it will undertake to fund the Holdings transaction. Following the close of the transactions and repayment of the Holdings' Term Loan, Moody's will withdraw its ratings on Holdings. Affirmations: Issuer: Crestwood Equity Partners LP Probability of Default Rating, Affirmed Ba3-PD Corporate Family Rating, Affirmed Ba3 Pref. Stock Non-cumulative Preferred Stock, Affirmed B2 (LGD6) Issuer: Crestwood Midstream Partners LP Senior Unsecured Notes, Affirmed B1 (LGD4) from (LGD5) Outlook Actions: Issuer: Crestwood Equity Partners LP Outlook, Changed To Stable From Negative Issuer: Crestwood Midstream Partners LP Outlook, Changed To Stable From Negative RATINGS RATIONALE Crestwood's Ba3 CFR reflects its basin diversification, good distribution coverage, and a contract profile with a high portion of fixed fee and take-or-pay contracts. The rating also reflects the company's relatively moderate leverage, although Crestwood's leverage (Debt/EBITDA) will increase by about 0.5x due to debt funding the transaction with Holdings. Significant free cash flow generation will allow Crestwood to reduce revolver borrowings and keep leverage near 4.5x. Crestwood also benefits from strong distribution coverage, which will improve following the retirement of the 11.5 million common units it will acquire from Holdings , with coverage likely to exceed 2x in 2021. The company will also benefit from enhancements to its governance, such as transitioning to an elected board of directors, and increased public float of its units. Crestwood is constrained by its relatively small scale, the inherent volumetric risks in its gathering and processing business, customer counterparty risk and still significant concentration of its operations in the Bakken shale. In conjunction with the transaction, the Board of Directors has authorized a $175 million common and preferred unit repurchase program. Moody's expects Crestwood to prioritize using free cash flow to reduce debt and that unit repurchase activity will be measured and to be nominal until the company reaches its leverage target. Midstream's senior notes ($2.1 billion in total) are unsecured, effectively subordinating their claim on the company's assets to its senior secured revolving credit facility. The substantial amount of secured debt in the capital structure results in the notes being rated B1, one notch below the Ba3 CFR. Crestwood's preferred units ($612 million outstanding at December 31, 2020) are structurally subordinated to Midstream's debt obligations and are rated B2. Crestwood's SGL-3 rating reflects Moody's expectation that the company will have adequate liquidity through mid-2022. Crestwood had $719 million drawn under its $1.25 billion revolving credit facility as of December 31, 2020, although following the company's $700 million notes issuance in January 2021, revolver balances are likely considerably lower given the company's intention to repay borrowings with a portion of the notes proceeds. The revolver expires in October 2023. Moody's expects Crestwood will generate about $150 million of free cash flow, which is a departure from the company's history of consistently outspending cash flow. Crestwood's conservative distribution policy, which targets distribution coverage of at least 1.8x, provides additional support to the company's liquidity. Financial covenants under the Crestwood credit facility are EBITDA / Interest of at least 2.5x, net Debt / EBITDA of not more than 5.5x and senior secured leverage ratio of not more than 3.75x. Moody's expects the company to maintain compliance with these covenants through mid-2022, with cushion initially narrow but expanding as the company reduces debt through free cash flow. CEQP's next debt maturity is in 2023 when its $700 million senior notes issue comes due. The stable outlook reflects Moody's expectation Crestwood will be able to reduce debt during 2021 and keep leverage at or below 4.5x. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Crestwood's ratings may be upgraded if leverage improves to below 4x and distribution coverage remains above 1.2x. A downgrade is possible if debt/EBITDA exceeds 5x or if liquidity weakens materially. Houston, Texas-based master limited partnership Crestwood, through its subsidiaries develops, acquires, owns or controls, and operates primarily fee-based assets and operations within the energy midstream sector. Its primary operations are located in the Bakken and Marcellus Shales and the Powder River and Permian Basins. The principal methodology used in these ratings was Midstream Energy published in December 2018. DIOCESE OF CAMDEN: Hires Prime Clerk as Administrative Advisor -------------------------------------------------------------- The Diocese of Camden, New Jersey, seeks approval from the U.S. Bankruptcy Court for the District of New Jersey to employ Prime Clerk, LLC as administrative advisor. The firm's services include: (a) assisting in the solicitation, balloting and tabulation of votes, preparing any related reports in support of confirmation of a Chapter 11 plan, and processing requests for documents; (b) preparing an official ballot certification and, if necessary, testifying in support of the ballot tabulation results; (c) managing and coordinating any distributions pursuant to a Chapter 11 plan; and (d) other bankruptcy administrative services Benjamin Steele, a partner at Prime Clerk, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Benjamin J. Steele Prime Clerk LLC 60 East 42nd Street, Suite 1440 New York, NY 10165 Tel: +1 212 257 5490 About The Diocese of Camden The Diocese of Camden, New Jersey is a non-profit religious corporation organized pursuant to Title 16 of the Revised Statutes of New Jersey. It is the secular legal embodiment of the Roman Catholic Diocese of Camden, a juridic person recognized under Canon Law. The Diocese of Camden sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.N.J. Case No. 20-21257) on Oct. 1, 2020. Reverend Robert E. Hughes, vicar general and vice president, signed the petition. In the petition, the Debtor disclosed total assets of $53,575,365 and liabilities of $25,727,209. Judge Jerrold N. Poslusny Jr. oversees the case. The Debtor tapped McManimon, Scotland & Baumann, LLC as its bankruptcy counsel, Eisneramper, LLP as financial advisor, Cooper Levenson P.A. and Duane Morris LLP as special counsel. Prime Clerk LLC is the Debtor's claims and noticing agent and administrative advisor. The U.S. Trustee for Regions 3 and 9 appointed an official committee of unsecured trade creditors in the Debtor's Chapter 11 case. The committee is represented by Porzio, Bromberg & Newman, P.C. EARTHWORX & SALES: Seeks Approval to Hire Wilson Accounting ----------------------------------------------------------- Earthworx & Sales, LLC seeks approval from the U.S. Bankruptcy Court for the Western District of Pennsylvania to employ Wilson Accounting Group as its accountant. The firm will be paid at these rates: Partners $175 per hour Staffs $90 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. Michael Wilson, Esq., a partner at Wilson Accounting Group, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Michael C. Wilson Wilson Accounting Group 300 Mt. Lebanon Blvd., Suite 201A 2nd Fl. Pittsburgh, PA 15234 Tel: (412) 109-4688 / (972) 628-3657 Email: mwilson@munckwilson.com About Earthworx & Sales Earthworx & Sales, LLC filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Penn. Case No. 21-20534) on March 11, 2021. At the time of the filing, the Debtor estimated $500,001 to $1 million in assets and $100,001 to $500,000 in liabilities. The Debtor tapped Calaiaro Valencik as its legal counsel and Wilson Accounting Group as its accountant. EAST RIDGE RETIREMENT: Fitch Puts 2014 Bonds on Watch Negative -------------------------------------------------------------- Fitch Ratings has maintained the Rating Watch Negative on the 'B-' rating assigned to approximately $69 million of series 2014 health facilities revenue bonds issued by the Alachua County Health Facilities Authority, FL on behalf of East Ridge Retirement Village (ERRV). Fitch Ratings has also assigned and placed on Rating Watch Negative, a 'B-' Issuer Default Rating (IDR) to ERRV. SECURITY The bonds are secured by a pledge of gross revenues and receivables of the obligated group (OG; ERRV is the only member), a first mortgage lien on all current and future property of the OG and a fully-funded debt service reserve. ANALYTICAL CONCLUSION The 'B-' rating reflects Fitch's view that material default risk remains present due to persistent softness in independent living unit (ILU) and assisted living unit (ALU) occupancy that is below covenanted levels, as well as ERRV's weak liquidity and profitability. The maintenance of the Rating Watch Negative reflects uncertainty given ERRV's expected violation of its debt service coverage ratio covenant for FY20 (December 31 year-end). ERRV's unaudited Dec. 31, 2020 disclosure calculated the FY20 debt service coverage ratio to be 0.68x. The covenant violation results in an event of default with remedies available to bondholders that include principal acceleration. Fitch will monitor the ongoing bondholder negotiations and take a rating action once more details become available. Any outcome or remedy enforcement that negatively affects ERRV's ability to repay its debt obligations would result in a downgrade. KEY RATING DRIVERS Revenue Defensibility: 'b' Single-site LPC With Weak Demand ERRV's ILU occupancy remains weak as evidenced by an average occupancy of only 78.1% in 2020. The coronavirus pandemic brought significant challenges to operations that slowed sales to only 25 ILUs in 2020 versus the 58 ILU sales that were anticipated at the beginning of the year. Given the recent financial challenges, ERRV has not been able to consistently renovate/update its ILUs. In addition, ERRV's ILUs are smaller than market expectations and the community has a low proportion of two-bedroom units compared to one-bedroom units, which brings additional sales challenges. Though Fitch believes that ERRV has the potential to improve its ILU occupancy in the upcoming year, units will likely require additional updates and combinations over time to meet market expectations. Overall healthcare occupancy has been inconsistent, but skilled nursing facility (SNF) occupancy showed a solid rebound to 97.3% at Dec. 31, 2020 after reaching a recent low of 58.1% due to pandemic-related restrictions. ALU occupancy, which had been improving prior to the coronavirus pandemic, remains weak as combined ALU and memory support unit (MSU) occupancy was only 70.2% at Dec. 31, 2020 - below the MTI's 88% quarterly occupancy target and 85.1% occupancy mark as of Dec. 31, 2019. ERRV's entrance fees are affordable compared to local home values as the weighted average entrance fee for all residences is around $200,000, while the average home value of homes in Cutler Bay is around $350,000. Despite the favorable pricing, management has not consistently increased fees in order to maintain favorable pricing. Management expects an improvement in occupancy in 2021, without a significant use of incentives. Operating Risk: 'bb' Weak Profitability; Limited Capital Investment in Recent Years ERRV's operating risk is weak given its predominantly type-A contract mix and weak profitability metrics. The community's net operating margin (NOM), NOM-adjusted and operating ratio have averaged only 0.7%, 12.1% and 117.1% over the past five years. Though the average age of plant of 10.5 years at Dec. 31, 2019 is good, ERRV's capital has only averaged 71.7% of depreciation over the past five years due to management's efforts to preserve liquidity and align spending with occupancy and margin improvements. If ILU sales activity accelerates, the community will need to increase spending to have an adequate inventory of updated units available for potential residents. Capital related metrics have been weak in recent years given the community's significant debt burden against its current financial profile. ERRV's debt issuance in 2015 was issued to finance a campus expansion project that included 90 new ALUs, 31 new MSUs and 74 new skilled nursing beds that replaced the existing AL and skilled nursing buildings. The increase in debt has resulted in an inflated MADS as a percent of revenue and debt to net available that has averaged 20.1% and 19.8x over the past five years. In addition, the community has struggled to maintain consistent overall occupancy that resulted in a debt service coverage violation in FY2018 (0.52x coverage) and is expected to result in a debt service coverage violation once the final FY2020 calculation is issued - unaudited debt service coverage was only 0.68x. Failure to achieve 1x coverage is an event of default under the bond documents and the uncertainty surrounding bondholder action is reflected in the Rating Watch Negative on the bonds. Financial Profile: 'b' Resilient Financial Profile Through Current Volatility As of YE 2020, ERRV cash-to-adjusted debt measured only 21.7%. ERRV's current level of liquidity, characterized by 110 DCOH as of Dec. 31, 2020 (according to the MTI calculation), is viewed negatively. Fitch's baseline expectation is for ERRV to improve its profitability and net entrance fees, but experience some liquidity erosion over the near-term. The community's ability to stabilize its liquidity position will be highly contingent on management's ability to accelerate ILU sales and occupancy over the next two years while managing capital spending. Though Fitch expects operational improvements that would support the current 'B-' rating, the stress case highlights ERRV's thin balance sheet as liquidity erodes significantly to a level that could result in a payment default, and therefore implies the possibility of further downgrade pressure. ASYMMETRIC ADDITIONAL RISK CONSIDERATIONS No asymmetric risk considerations were relevant to the rating determination. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Sustained rebound in operating metrics (e.g., operating ratio below 100% and/or NOM of better than 3%) leading to cash flow generation sufficient to build adequate headroom to debt service coverage covenant; -- ILU occupancy improves to be consistently above 88% -- Significant liquidity improvement that increases DCOH to be consistently above 200 days. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to reach permanent forbearance agreement; -- Inability to execute continued operating improvement, leading to reduced liquidity and weak debt service coverage. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure 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 three 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. ERRV is a Type A life plan community located on 76 acres in the town of Cutler Bay, Florida, approximately 20 miles south of Miami. The community currently includes 221 ILUs, 90 ALUs, 31 memory care units and 74 SNF units. ILU residents are mostly in lifecare contracts with nonrefundable entrance fees. ERRV reported total operating revenues of approximately $26.9 million in fiscal 2020. ERRV is currently the only OG member. Since March 27, 2008 ERRV has been controlled by Santa Fe Senior Living (SFSL) via an affiliation agreement between ERRV and SFSL's corporate parent, SantaFe HealthCare (SFHC). Neither SFSL nor SFHC are obligated on the series 2014 bonds. SFSL opened the Terraces at Bonita Springs in July 2013 and also operates North Florida Retirement Village, a rental community in Gainesville, Florida. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. EL PASO COUNSELING: Says Talks to Assume Lease With HTA Ongoing --------------------------------------------------------------- El Paso Counseling Center of Express Arts, LLC ("CCOEA") filed with the U.S. Bankruptcy Court for the Western District of Texas, El Paso Division, a Disclosure Statement and accompanying Plan of Reorganization. CCOEA's Plan is based on the future income generated from the counseling services provided to its counseling patients. This is the sole source of revenue for payment of Allowed Claims under the Plan. Class 1 consists of the Priority Claim of HTA-Sierra, LLC ("HTA") for the post petition rent payment for June 2020 which accrued contemporaneously with the filing of the Chapter 11 Petition in the amount of $17,868. This amount will be paid no later than the Effective Date. This Class is Unimpaired. Allowed Secured Claims are those secured by property of the Bankruptcy Estate. If the value of the collateral securing the creditor's claim is less than the amount of the creditor's allowed claim, the difference constituting the deficiency will be classified as a General Unsecured Claim. However, CCOEA does not foresee any General Unsecured Claims arising at this point. CCOEA is not bifurcating any Allowed Secured Claims. Class 1 consists of the Secured Claim of Sunflower Bank in the amount of $49,151.94 secured by a Security Agreement and UCC-1 Financing Statement on accounts, inventory, and equipment. Upon payment in full of Claim No. 2 Sunflower Bank will release its lien on the Collateral for this loan. Class 2 consists of the Secured Claim of Sunflower Bank in the amount of $47,115 for Debtor's participation in the Paycheck Protection Program (PPP) guaranteed by the United States of America, Small Business Administration (the "PPP SBA Loan"). On Feb. 18, 2021, CCOEA received the approval of its application for forgiveness of the PPP SBA Loan. Thus, POC No. 3 has been satisfied. Class 4 consists of the Secured Claim of State Farm Bank in the amount of $6,718 secured by a Texas Certificate of Title on a 2016 Cadillac SRX. Upon payment in full of Claim No. 4 State Farm Bank will release its lien on the Collateral for this loan. Class 5 consists of the Lease Assumption Claim of HTA-Sierra, LLC ("HTA"). HTA's Proof of Claim lists $87,440.21 owed (after payment of the June 2020 rent amount). CCOEA has not moved to assume the Lease with HTA. Because the Parties have been attempting to negotiate a resolution of this amount, and thus, the basis for the multiple extension of the deadline by which to assume or reject. Nevertheless, CCOEA foresees two scenarios for assumption. CCOEA would file a Motion to Assume Lease depending on the scenario that materializes within the next 30 days. * Scenario A: CCOEA proposes assumptions under the following terms: a) Outstanding rent for June 2020 be forgiven; b) The moving allowance of $13,877 and rent abatement due for the 70 days of 80 plus temperature be credited to eliminate all outstanding CAM charges; c) All future CAM charges be waived for 2021; and d) CAM charges are capped at $500 per month for the total account for the remainder of the Lease. * Scenario B: No agreement with HTA is reached, and its claim of $87,440 is allowed. Under this scenario, CCOEA would move to assume the Lease under the following terms: a) The June 2020 postpetition rent payment is cured; and b) As adequate assurance of future performance, the $87,440 would be cured over a period of 72 months in the amount of $1,214 per month. If no agreement is reached with HTA, the amount in its Proof of Claim is subject to set offs and credits per CCOEA's records. In Scenario B, if the June payment is cured, CCOEA's reflect that the overall outstanding would be $69,391 minus the uncredited moving allowance reducing the claim to $55,513. Moreover, that total does not include the rent abatement. HTA's original Proof of Claim does not credit the 3 months rent on the second space. Class 6 consists of the Equity Holder of CCOEA who is Dr. Leah Miller. Dr. Miller will retain her equity interest in CCOEA. Dr. Miller has personally guaranteed the Sunflower Bank and State Farm Bank loans as well as the Commercial Lease with HTA. A full-text copy of the Disclosure Statement dated March 28, 2021, is available at https://bit.ly/3fzECjI from PacerMonitor.com at no charge. Attorneys for Debtor: Carlos A. Miranda, Esq. MIRANDA & MALDONADO, P.C. 5915 Silver Springs, Bldg. 7 El Paso, Texas 79912 Tel: (915) 587-5000 Fax: (915) 587-5001 E-mail: cmiranda@eptxlayers.com cmaldonado@eptxlawyers.com About El Paso Counseling Center El Paso Counseling Center of Expressive Arts, P.C.'s mission is to serve residents of El Paso County by providing quality mental health services. The Debtor filed a Chapter 11 petition (Bankr. W.D. Tex. Case No. 20-30669) on June 1, 2020. The Debtor is represented by Carlos Miranda, Esq. of MIRANDA & MALDONADO, PC. EPIC Y-GRADE: Moody's Lowers CFR to Caa3 on Weak Liquidity ---------------------------------------------------------- Moody's Investors Service downgraded EPIC Y-Grade Services, LP's Corporate Family Rating to Caa3 from Caa2 and Probability of Default Rating to Caa3-PD from Caa2-PD. Moody's downgraded the ratings of EPIC Y-Grade's senior secured term loan due 2024, senior secured term loan due 2027 (issued under the 2018 credit agreement) and senior secured term loan due 2027 (issued under the 2020 credit agreement) to Caa3 from Caa2. Moody's downgraded the rating of the senior secured revolver due 2025 to B2 from B1. The outlook remains negative. "The downgrade of EPIC Y-Grade's ratings reflects increased debt on an already highly leveraged balance sheet in the context of weaker than expected volume and EBITDA that will lead to continued weak credit metrics over the next 12-18 months," said Jonathan Teitel, a Moody's analyst. Downgrades: Issuer: EPIC Y-Grade Services, LP Probability of Default Rating, Downgraded to Caa3-PD from Caa2-PD Corporate Family Rating, Downgraded to Caa3 from Caa2 GTD Senior Secured 1st Lien Revolving Credit Facility, Downgraded to B2 (LGD1) from B1 (LGD1) GTD Senior Secured 1st Lien Term Loan, Downgraded to Caa3 (LGD4) from Caa2 (LGD4) Outlook Actions: Issuer: EPIC Y-Grade Services, LP Outlook, Remains Negative RATINGS RATIONALE EPIC Y-Grade's Caa3 CFR reflects a large debt burden, minimal EBITDA and weak liquidity. Cash needs in 2021 are supported by proceeds from the new $50 million term loan due 2025 (issued under the 2021 credit agreement, unrated) and matching $50 million equity investment by the company's owners (including amounts already contributed this year and commitments). Moody's expects that volumes on EPIC Y-Grade's system will ramp up during 2021 driving EBITDA higher but remain lower than previously expected. Consequently, Moody's expects leverage will be very high at the end of 2021. Only a portion of cash flow is underpinned by minimum volume commitments leaving the company exposed to volume risks. The company's first fractionator was placed into service in mid-2020. The company paused construction of its second fractionator though other sizable capital spending needs remain in 2021. EPIC Y-Grade's contracts are fixed fee and mostly long-term leaving the company with limited direct commodity price risk. Moody's views EPIC Y-Grade's liquidity as weak. The company has a fully used $40 million revolver. Notwithstanding the additional equity and debt capital, Moody's anticipates that there could be additional capital needs if volumes do not increase sufficiently. The loans do not have financial covenants until 2023. EPIC Y-Grade's senior secured term loans due 2024 and 2027 are rated Caa3, the same rating as the CFR because they comprise the vast majority of the company's debt, rank equally and have the same payment priority. The company's senior secured revolver due 2025 is first in payment priority over the term loans and that priority combined with its small size relative to the term loans results in it being rated B2. EPIC Y-Grade used investment capacity under its existing credit agreements to place a 25% interest in its first fractionator into a joint venture, which will also be a guarantor of the senior secured term loan due 2025 (unrated) but not of the other loans. With that exception, the term loan due 2025 has the same ranking, guarantees and collateral as the other term loans. The joint venture will be majority owned by EPIC Y-Grade's owners with an ownership stake also held by the lender of the term loan due 2025. The negative outlook reflects high credit risks in the context of a highly leveraged balance sheet and weak liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to a downgrade include erosion of liquidity, more debt or increased risk of default. Factors that could lead to an upgrade include improved liquidity and significant EBITDA growth with correspondingly much lower leverage. EPIC Y-Grade is a privately-owned midstream energy business with NGL pipelines running from the Permian Basin to Corpus Christi. The company is majority-owned by Ares Management with ownership stakes also held by Noble Midstream Partners and an investor group led by FS Investments. The principal methodology used in these ratings was Midstream Energy published in December 2018. FAIRBANKS COMPANY: Taps Logan & Company as Balloting Agent ---------------------------------------------------------- The Fairbanks Company seeks approval from the U.S. Bankruptcy Court for the Northern District of Georgia to employ Logan & Company, Inc. as balloting and tabulation agent. The firm will be paid based upon its normal and usual hourly billing rates, and reimbursed for out-of-pocket expenses incurred. The retainer fee is $3,000. Kathleen Logan, a partner at Logan & Company, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Kathleen M. Logan Logan & Company, Inc. 546 Valley Road, 2nd Floor Upper Montclair, NJ 07043 Tel: (973) 509-3190 Fax: (973) 509-3191 About The Fairbanks Company Incorporated in 1891, The Fairbanks Company -- http://www.fairbankscasters.com/-- is a Georgia corporation that manufactures customized material handling equipment in its more than 200,000-square-foot manufacturing and warehousing facility located in Rome, Ga. The Fairbanks Company sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ga. Case No. 18-41768) on July 31, 2018. In the petition signed by CEO Robert P. Lahre, the Debtor estimated assets of $1 million to $10 million and liabilities of $100,000 to $500,000. Judge Paul W. Bonapfel oversees the case. The Debtor tapped Reed Smith LLP as its bankruptcy counsel, and Ogier, Rothschild & Rosenfeld, PC, as its local counsel. Cohen & Grigsby, P.C., is the insurance coverage counsel. On Oct. 11, 2018, the U.S. Trustee for Region 21 appointed a committee, which is comprised of creditors who hold unsecured claims against the Debtor for personal injury or wrongful death resulting from exposure to asbestos or asbestos-containing products. The committee tapped Caplin & Drysdale, Chartered as its legal counsel, and Jones & Walden, LLC as its local counsel. On April 17, 2019, the court appointed James L. Patton Jr. as legal representative for persons who may in the future assert an asbestos-related personal injury claim against the Debtor. FERRELLGAS PARTNERS: Completes Chapter 11 Restructuring ------------------------------------------------------- Ferrellgas Partners, L.P. (OTC: FGPRQ) announced March 30, 2021, the successful completion of its previously announced restructuring transactions that strengthen its balance sheet while allowing it to continue as an employee-owned enterprise. James E. Ferrell, Chairman of the Ferrellgas Board of Directors, President, and Chief Executive Officer, said, "I am pleased to announce that we have followed through, as promised, on our commitment to strengthen our balance sheet and remain an employee-owned business that will continue to provide exceptional service to our more than 700,000 nationwide customers well into the future. This is a significant milestone for the company and its nearly 4,500 employees, and serves as irrefutable evidence that Ferrellgas, and its leading tank exchange brand, Blue Rhino, will continue as a leader in the U.S. propane industry." As previously announced, on December 10, 2020, Holdings entered into a Transaction Support Agreement ("TSA") with a majority of the holders of the Holdings unsecured notes that were due June 2020 (the "Holdings Notes"). The TSA included a comprehensive restructuring plan at both the Holdings level to address the maturity of its notes and at Ferrellgas, L.P. ("OpCo"), the operating entity, to address over $2 billion in debt obligations. Based on the transactions consummated today, Holdings announces that OpCo has successfully (1) established a new $350 million senior secured revolving credit facility, (2) issued $1.475 billion in new senior unsecured notes due in 2026 and 2029, and (3) sold $700 million in senior preferred equity. The senior preferred equity financing was led by funds managed by the Private Equity Group and the Credit Group of Ares Management Corporation ("Ares"). The proceeds of these transactions have been used to satisfy, in full, OpCo's existing debt obligations. Further, as contemplated in the TSA, Holdings also announces that its plan of reorganization, by which the existing Holdings Notes are to be exchanged for new limited partnership units at Holdings, has gone effective and Holdings has successfully emerged from chapter 11 protection. The restructuring transactions enable the nearly 100-year-old propane retailer, known for its leading tank exchange business, Blue Rhino, to continue to serve the propane needs of millions of Americans in all 50 states and Puerto Rico, during a pandemic year that was also heavily impacted by record-cold temperatures in many parts of the country. About Ferrellgas Ferrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., and subsidiaries, serves propane customers in all 50 states, the District of Columbia, and Puerto Rico. Ferrellgas employees indirectly own 22.8 million common units of the partnership, through an employee stock ownership plan. On the Web: http://www.ferrellgas.com/ Ferrellgas Partners LP and Ferrellgas Partners Finance filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Case Nos. 21-10021 and 21-10020) on Jan. 11, 2021. James E. Ferrell, chief executive officer and president, signed the petitions. At the time of the filing, Ferrellgas Partners, LP was estimated to have $100 million to $500 million in both assets and liabilities while Ferrellgas Partners Finance was estimated to have less than $50,000 in assets and $100 million to $500 million in liabilities. Judge Mary F. Walrath oversees the cases. Squire Patton Boggs (US) LLP served as legal counsel to Ferrellgas and Moelis & Company LLC served as financial advisor and placement agent. Chipman, Brown, Cicero & Cole, LLP is the local bankruptcy counsel. Ryniker Consultants is the financial advisor. Prime Clerk LLC is the claims, noticing & solicitation agent. Davis Polk & Wardwell LLP as legal counsel and Ducera Partners LLC as financial advisor advised the ad hoc group of holders of the Holdings Notes. Sullivan & Cromwell LLP served as legal counsel to Ares. FORD MOTOR: Moody's Alters Outlook on Ba2 CFR to Stable ------------------------------------------------------- Moody's Investors Service affirmed Ford Motor Company's Ba2 senior unsecured ratings and corporate family ratings. The outlook is changed to stable from negative. The change in outlook to stable reflects Ford's record of managing through the Covid- induced impact on auto sales and production volumes by having a strong liquidity position, and Moody's expectation that Ford's robust new product launches this year and progress in its 'Redesign' initiatives will enable Ford to be on a cadence of improving consolidated EBITA margin to exceed 3% (on Moody's adjusted basis) by the latter part of 2022. RATINGS RATIONALE The ratings reflect Ford's competitive position in North American that will be strengthened by a robust new product cadence that includes the launch of the highly profitable F-150 truck in late 2020. The effective launch of Ford's flagship product is critical, and Moody's believes that Ford will continue to ensure the most effective roll-out possible. Ford should achieve a low single digit Moody's-adjusted EBITA margin in 2021 despite the semiconductor shortage. The company's 2021 EBIT guidance of $8 billion to $9 billion (including Ford Credit and before Redesign charges) could be adversely impacted by $1.0 to $2.5 billion as a result of the semiconductor shortage. This could result in the Moody's adjusted automotive EBITA margin falling to a range of 2% to 3% (excluding Ford Credit and including cash restricting charges). Ford is addressing its operating issues with low financial leverage, and strong liquidity with a net cash position. Ford's new senior management has the company well down the road with the Redesign restructuring program that intends to stem losses in the company's European, South American and other international markets over time. International operations are still generating approximately $1.5 billion in annual losses, however, $2.2 to $2.7 billion of EBIT charges with cash effect of $3.0 to $3.5 billion for restructuring actions could be incurred in 2021. Ford must also restore its position in its China joint venture, where it once received $1.5 billion in dividends but is now generating $500 million in losses. In addition to addressing the core operating issues, Ford faces the considerable challenge of investing heavily to build scale and profitability its alternative fuel vehicle (AFV) franchise, which is a long term and capital intensive process. Moody's expects that Ford's investments in battery electric vehicles (BEV), AFVs and autonomous vehicles (AV) will enable it to meet regulatory emission requirements and to remain competitive with peers as the industry moves from an internal combustion engine (ICE) model to one that is increasingly driven by AFVs and BEVs. Ford is allocating more than $22 billion in BEV investments through 2025, which should enable it to keep pace with the industry's transition to electrified vehicles. In addition, Ford's alliance with Volkswagen in the production of electric vehicles in Europe and the development of AV technology, reflect its competitive positioning in these two markets. The most formidable challenge will be generating profits from its BEV portfolio. BEVs are currently an unprofitable or a very low-return market for the entire auto industry. Attracting a customer base, establishing effective price points, and scaling up production to a level that can support the massive investments devoted to BEVs will be a significant long-term challenge for Ford and its peers. Ford will also continue to face areas of event risk that can seriously erode performance. These risks include: economic cyclicality, restructurings, strikes, product recalls, supply chain disruptions, and regulatory/litigation costs. A sound liquidity position is a core element of Ford's financial strategy. At year-end 2020 the company had $31 billion of cash and $16 billion of available committed credit facilities for total liquidity of $47 billion. This compares with total automotive debt of $24 billion, of which less than $1 billion matures during the coming twelve months. The company's liquidity strategy affords it adequate capacity to fund capital investment plans, implement its Redesign restructurings, and contend with ongoing event risk. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rating could be downgraded if operational disruptions or severe declines in retail sales and market share, especially in the North American light truck segment, prevent the company from establishing a clear trajectory for achieving (by 2022): Moody's-adjusted global automotive EBITA margin exceeding 3%; North American EBIT margin approximating 8%; EBITA/interest over 2x; and, solidly positive free cash flow. The rating could be upgraded if Ford's trajectory for 2022 performance reflects: Moody's-adjusted EBITA margin above 5%; North American EBIT margin approaching 10%; EBITA/interest exceeding 3.5x; and free cash flow over $3 billion. Meeting future carbon emissions requirements in major regions (North America, China and Europe) will pose financial and technological challenges for Ford. Ford has been active in addressing environmental risks, which will remain a top agenda item in its forward planning. Nevertheless, Moody's expects that the company's current product portfolio leaves it vulnerable to potentially large emission penalties in 2021 and beyond. Reflecting these vulnerabilities, the new product launch will include a number of battery electric and full hybrid vehicles as important contributors in Ford's ability to comply with increasingly challenging emission regulations in the US and Europe. However, customer acceptance of these vehicles and Ford's ability to earn an economic return on them has yet to be demonstrated. Moody's does not anticipate Ford's long-term product and investment strategy will be materially impacted by either US compliance with the Paris Accord or the possible reaffirmation/termination of the California exemption from US federal emission standards. Given the auto industry's importance to employment levels in the countries in which it operates, labor relations and facility location plans can have an impact on Ford's credit profile. Recent negotiation with the UAW provide a framework that will not materially alter Ford's competitive position or its ability to pursue its electrification and Redesign plan. The company is also taking adequate action to minimize disruptions relating to the restructuring of its international operations. The large family ownership structure in Ford provides the company with an important degree of insulation from potential activist shareholders. Activist intervention can be a disruptive factor in the US auto sector. The following rating actions were taken: Issuer: Ford Motor Company Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Speculative Grade Liquidity, remains SGL-1 Senior Unsecured Bank Credit Facility, Affirmed Ba2 (LGD4) Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD4) Senior Unsecured Conv./Exch. Bond/Debenture, Affirmed Ba2 (LGD4) Issuer: Ford Holdings, Inc. Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD4) Outlook Actions: Issuer: Ford Holdings, Inc. Outlook, Changed To Stable From Negative Issuer: Ford Motor Company Outlook, Changed To Stable From Negative The methodologies used in these ratings were Automobile Manufacturer Industry published in June 2017. Ford Motor Company, headquartered in Dearborn, Michigan, is a leading global automotive manufacturer with 2020 revenues of $116 billion. FORD MOTOR: Moody's Alters Outlook on Ba2 Ratings to Stable ----------------------------------------------------------- Moody's Investors Service affirmed its ratings for Ford Motor Credit Company LLC and its subsidiaries, including the Ba2 long-term senior unsecured rating and Not Prime short-term ratings. The outlook was changed to stable from negative. The rating actions follow similar actions on the ratings for Ford Credit's parent, Ford Motor Company (Ford, Ba2 corporate family rating, stable), consistent with Moody's Methodology of Captive Finance Subsidiaries of Nonfinancial Corporations. This is based on Ford Credit's strategic significance to its parent, Moody's expectation that Ford would support Ford Credit, if required, as well as the explicit support agreement in place between the two companies. Affirmations: Issuer: Ford Motor Credit Company LLC Commercial Paper, Affirmed NP Backed Commercial Paper, Affirmed NP Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)Ba2 Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Ba2 Other Short Term (Local Currency), Affirmed (P)NP Other Short Term (Foreign Currency), Affirmed (P)NP Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba2 Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Ba2 Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Ba2 Senior Unsecured Shelf, Affirmed (P)Ba2 Subordinate Shelf, Affirmed (P)Ba3 Issuer: FCE Bank plc Senior Unsecured Bank Credit Facility, Affirmed Ba2 Backed ST Deposit Note/CD Program (Foreign Currency), Affirmed NP Commercial Paper (Foreign Currency), Affirmed NP Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Ba2 Other Short Term (Foreign Currency), Affirmed (P)NP Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Ba2 Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Ba2 Issuer: Ford Credit Canada Company Backed Commercial Paper, Affirmed NP Backed Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)Ba2 Backed Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Ba2 Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 Backed Senior Unsecured Shelf, Affirmed (P)Ba2 Outlook Actions: Issuer: Ford Motor Credit Company LLC Outlook, Changed to Stable from Negative Issuer: FCE Bank plc Outlook, Changed to Stable from Negative Issuer: Ford Credit Canada Company Outlook, Changed to Stable from Negative RATINGS RATIONALE Ford Credit's unchanged ba2 standalone assessment takes into consideration the company's well managed portfolio asset quality, adequate capital cushion that protects its creditors against unexpected losses, and good liquidity supported by its operating model. Ford Credit is the only rated auto captive firm that has a relatively limited lease portfolio (20% of managed assets as of December 31, 2020) making it less vulnerable to a rapid decline of used car prices than peers. Moody's expects that Ford Credit's net receivables ($132 billion as of December 31, 2020) will moderately increase by low single digits in the next 12 months. This assumes that the company will maintain an overall penetration rate of around 60%, broadly in line with historical figures. Moody's believes that Ford Credit will manage its debt to equity leverage to within its historical range (9.8x as of December 31, 2020), given its consistent distribution strategies. Credit challenges for Ford Credit include its exposure to the performance trends of its parent and its significant use of securitization, reducing the company's alternate sources of liquidity. Ford Credit's liquidity position is good and totaled $35.4 billion as of December 31, 2020, comprising $14.6 billion of cash (net of $3.9 billion of cash reserves held for ABS facilities), $18.8 billion from committed asset backed facilities (excluding capacity in excess of eligible receivables), and $2.0 billion under other unsecured credit facilities ($2.5bn capacity). Ford Credit's ba2 standalone assessment is line with the rating of its parent Ford. The stable outlook on Ford Credit was prompted by similar actions taken on the ratings for its ultimate parent Ford. Ford's improved credit profile will have positive implications for Ford Credit's access to funding and its financing volumes. Ford's support to Ford Credit is evidenced by a support agreement under which Ford Credit can require Ford to inject capital to restore leverage below an 11.5x debt to equity threshold, should Ford Credit exceed the threshold. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the ratings for Ford are upgraded. A material decline in asset quality and profitability beyond Moody's current expectations, diminished liquidity, or leverage as measured by tangible common equity over tangible managed assets to less than 8% could lead to lower standalone assessment for Ford Credit. Ford Credit's ratings could be downgraded if Ford's ratings are downgraded. The methodologies used in these ratings were Finance Companies Methodology published in November 2019. Ford Credit is an indirect, wholly owned subsidiary of Ford Motor Company. Ford Credit had a $132 billion portfolio of finance receivables and operating leases offered through two segments: consumer and non-consumer as of December 31, 2020. The consumer segment comprises products offered to individuals and businesses for the acquisition of Ford and Lincoln vehicles from dealers, in the form of retail installment sales and lease contracts. The non-consumer segment comprises primarily of wholesale loans offered to auto dealers. FRASIER MEADOWS: Fitch Assigns BB+ Issuer Default Rating -------------------------------------------------------- Fitch affirmed Frasier Meadows Retirement Community Project d.b.a. Frasier Meadows Manor, Inc., Colorado's approximately $80 million of series 2017A and B revenue refunding bonds issued by the Colorado Health Facilities Authority on behalf of Frasier at 'BB+'. In addition, Fitch has assigned Frasier a 'BB+' Issuer Default Rating. The Rating Outlook is Stable. SECURITY Payment on the bonds is secured by a gross revenue pledge and first mortgage lien on the Frasier bonds. ANALYTICAL CONCLUSION The 'BB+' rating primarily reflects Frasier's strong revenue defensibility balanced against weak operating risk. Frasier's excess cash flow generation has funded extensive capital projects and should continue to fund future construction, resulting in Frasier's liquidity profile remaining flat throughout Fitch's forward-looking scenario analysis. Frasier's business profile is solid, characterized by strong revenue defensibility as an established operator. Weak operating risk reflects Frasier's consistent history of operations and extensive capital improvements. The rating incorporates expectations for elevated future capex but not for significant additional debt. The 'BB+' rating assumes net entrance fee receipts and net operating revenue will continue to increase from the additional 98 expansion independent living units (ILUs). KEY RATING DRIVERS Revenue Defensibility: 'a' Single Site LPC with Strong Demand and Pricing Characteristics Frasier is a single-site provider with limited competition. Substantial barriers to entry prevent additional life plan communities (LPCs) from entering the Boulder service area. Frasier's robust demand contributes to Fitch's strong revenue defensibility assessment. Utilization has been consistently strong, albeit weaker during the coronavirus pandemic. Frasier has a history of regular fee increases, and weighted-average entrance fees are substantially below prevailing housing prices in the market. Operating Risk: 'bb' Large Capital Projects, stable core operations Fitch's assessment of Frasier's operating risk is based on its demonstrated track record of consistent cost management and its predominantly Type B contract mix. It's average age of plant is favorably low, and capital spending has been high over the past several years. Future capital spending is expected to be elevated given management's plans to renovate the healthcare center and potentially add ILUs. Fitch believes Frasier can absorb the elevated planned capex at its current rating level assuming no material increase in debt. Financial Profile: 'bb' Stable liquidity and elevated leverage As of YE 2020, Frasier had unrestricted cash-to-adjusted debt of about 36%. Given Frasier's strong revenue defensibility and planned capex, Fitch expects Frasier's liquidity metrics to remain consistent with historical averages and the 'BB+' rating, despite the recent economic and operational volatility resulting from the pandemic. ASYMMETRIC ADDITIONAL RISK CONSIDERATIONS No asymmetric risk considerations were relevant to the rating determination. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Continued balance sheet accretion such that cash-to-adjusted debt levels are expected to improve and be sustained at levels approaching 70%. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Frasier's financial profile remains stable through Fitch's stress case scenario. However, liquidity remains flat, indicating additional debt such that cash-to-adjusted debt falls below 30%, which could pressure the rating. -- The rating could be pressured if operating performance deteriorates substantially such that revenue-only maximum annual debt service (MADS) coverage falls below 0.0x or if the net operating margin falls below 11%. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure 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 three 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. CREDIT PROFILE Established in 1956, Frasier owns and operates a single-site life plan community with 298 ILUs, 19 assisted living units, 19 memory care units (MCUs) and 54 skilled nursing facility (SNF) beds on a 20-acre campus in Boulder, CO. Frasier currently offers a Type B modified-fee-for-service contract, with 50% refundable or nonrefundable entrance fee residency agreements. Nonrefundable entrance fees are approximately 25% lower than refundable entrance fees. All agreements provide a modest discount for healthcare benefits as well as 30 free healthcare days per ILU per year in a semiprivate room. Entrance fees for ILUs range from $59,000-$782,000. Monthly service fees range from $1,719-$5,047. Since opening in 1960, Frasier has undergone several renovation and expansion projects. The most recently executed project added 98 ILUs, opened in January of 2020 and filled within the first six months despite pandemic pressures. In addition, there have been ongoing reconfigurations and renovations as part of Frasier's flood recovery efforts. Management actively maintains the campus with ongoing capital projects. Plans to renovate the healthcare center are in development. REVENUE DEFENSIBILITY Frasier is a single-site provider in a minimally competitive service area. Fitch views Frasier's robust demand as contributing to strong revenue defensibility. Favorably, demand withstood sectorwide downward pressure through the pandemic. Utilization in the ILUs has been above 92% since 2017. ALUs and SNFs also show good utilization, with occupancy above 90% since 2017. MCU utilization has fluctuated from approximately 76%-100% over the past several years. Frasier has demonstrated stable occupancy over the past several years. Despite the global pandemic in 2020, occupancy remained good in the ILUs, at 92% with a waitlist of 360. In January 2020, Frasier opened its 98-ILU expansion. It filled ahead of schedule, with 89 move-ins in the first six months of the year. With strong demand for its services, Frasier planned to expand its healthcare center in 2020. These plans were halted to protect residents and staff from coronavirus exposure. While Frasier still intends to undergo healthcare renovations, the initial plan is being altered to incorporate enhancements based on Frasier's pandemic experience and possibly add more ILUs. The service area in Boulder is strong. It is an affluent city with a growing population and rising housing prices. Median household income levels are well above the national average. According to Zillow.com, property values in Boulder are well above the national average and have grown by 6.3% in the last year. With the typical home value around $844,000 and the highest entrance fee of $782,000, Frasier has strong price flexibility. OPERATING RISK Frasier offers Type B contracts which require upfront entrance and ongoing monthly fees. This contract includes moderate actuarial risk and future service liability risk. Frasier has a history of consistent cost management, with a four-year average operating ratio of 108.2%, net operating margin (NOM) of negative 3.2% and NOM-adjusted of 18%. Core operating performance has remained relatively stable in 2020, with an operating ratio of 113% and NOM of 3.8% through the six months ended Dec. 31, 2020. Frasier's capex averaged about 684% of depreciation over the prior four years and is expected to remain elevated over the next few years. Average age of plant is low at 6.9 years. Management planned to renovate the healthcare center in 2020 but postponed construction in order to reevaluate the plan and incorporate insights gained from their successful infection containment and mitigation during the pandemic. Additional ILUs are under consideration as well. Frasier's capital-related metrics are soft, with revenue-only MADS coverage of 0.1x and debt-to-net available of 38.0x in 2020. MADS represented an elevated 28% of 2020 revenues. Frasier is heavily reliant on turnover entrance fees for timely payment of debt service. This indicates additional debt may pressure Frasier's rating. FINANCIAL PROFILE Fitch expects Frasier's key leverage metrics to remain consistent with a 'BB+' rating throughout the current downward economic and business cycle. As of YE 2020, Frasier had unrestricted cash of approximately $47.4 million. This represented about 36% of total adjusted debt, which includes approximately $131.7 million of long-term debt. Liquidity has remained relatively stable yoy ranging from 31%-36% cash-to-debt between 2018 and 2020. Through Fitch's new baseline scenario, Fitch expects Frasier will see improvement in MADS coverage while liquidity remains near current levels. Liquidity growth is suppressed in the scenario due to elevated planned capex. Fitch's baseline scenario assumes both a significant economic stress to reflect equity volatility and a business cycle stress to reflect pressure on net entrance fees during the pandemic in year one, followed by a sharp increase in MADS coverage through year five. Despite the stress, Frasier maintains cash-to-adjusted debt levels that are consistent with the 'BB+' rating throughout Fitch's baseline forward-looking scenario and remains resilient in Fitch's stress case scenario, which assumes an even deeper economic and business cycle stress that persists until 2022. MADS coverage increases from 0.5x in year one of the baseline scenario (equivalent to calendar-year 2020; it was at 0.4x as of June 30, 2020), and steadily increases to 2.0x as revenue and net entrance fees receipts increase from the 98 ILU expansion that opened in January of 2020. Frasier had 595 days cash on hand as of June 30, 2020, resulting in a liquidity profile assessment that is neutral to the rating. ASYMMETRIC ADDITIONAL RISK CONSIDERATIONS No asymmetric risk considerations were relevant to the rating determination. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. FUTURUM COMMUNICATIONS: Seeks to Hire Hoff Law Offices as Counsel ----------------------------------------------------------------- Futurum Communications Corporation seeks approval from the U.S. Bankruptcy Court for the District of Colorado to employ Hoff Law Offices, P.C. to handle its Chapter 11 case. Hoff Law Offices will be paid at the rate of $400 per hour for attorneys and $125 per hour for paralegals. The firm will also be reimbursed for out-of-pocket expenses incurred. The retainer fee is $24,000. Jessica Hoff, Esq., a partner at Hoff Law Offices, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Jessica L. Hoff, Esq. Jessica L. Hoff of Hoff Law Offices, P.C. 6400 S Fiddlers Green Cir #250, Greenwood Village, CO 80111 Tel: Tel: (720) 739-3599 Email: jhoff@hofflawoffices.com About Futurum Communications Corporation Futurum Communications Corporation -- https://forethought.net -- is an independent locally owned internet, cloud and communications service provider with offices in Denver, Grand Junction and Durango, offering a portfolio of enterprise-level cloud hosting, colocation, Internet, voice and data solutions. Futurum Communications sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Colo. Case No. 21-11331) on March 21, 2021. Jawaid Bazyar, president, signed the petition. In the petition, the Debtor disclosed assets of between $1 million and $10 million and liabilities of the same range. Judge Kimberley H. Tyson oversees the case. Jessica L. Hoff of Hoff Law Offices, P.C. is the Debtor's legal counsel. GENERAL MOTORS: Moody's Affirms Ba2 Rating on Preferred Stock ------------------------------------------------------------- Moody's Investors Service affirmed all ratings for General Motors Financial Company, Inc. (GMF) and its subsidiaries, including the Baa3 long-term senior unsecured rating and the Prime-3 short-term ratings. The outlook was changed to stable from negative. The rating actions follow similar actions on the ratings for GMF's parent, General Motors Company (GM, Baa3 senior unsecured, stable), consistent with Moody's Methodology of Captive Finance Subsidiaries of Nonfinancial Corporations. This is based on GMF's strategic significance to its parent, Moody's expectation that GM would support GMF, if required, as well as the explicit support agreement in place between the two companies. Affirmations: Issuer: General Motors Financial Company, Inc. Commercial Paper, Affirmed P-3 LT Issuer Rating, Affirmed Baa3 Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)Baa3 Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa3 Pref. Stock, Affirmed Ba2 Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Baa3 Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Baa3 Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Baa3 Backed Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Baa3 Pref. Shelf, Affirmed (P)Ba2 Senior Unsecured Shelf, Affirmed (P)Baa3 Subordinate Shelf, Affirmed (P)Ba1 Issuer: General Motors Financial of Canada, Ltd. Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3 Issuer: GMF Australia Pty Ltd Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3 Issuer: General Motors Financial International BV Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3 Outlook Actions: Issuer: General Motors Financial Company, Inc. Outlook, Changed To Stable From Negative Issuer: General Motors Financial of Canada, Ltd. Outlook, Changed To Stable From Negative Issuer: General Motors Financial International BV Outlook, Changed To Stable From Negative RATINGS RATIONALE The affirmation of GMF's ratings reflects Moody's unchanged assessment of the company's ba3 standalone assessment and affiliate support from GM. GMF's ba3 standalone assessment is supported by the company's adequate capital cushion that protects creditors against unexpected losses, and good liquidity position. GMF's tangible equity to tangible assets capital was 10.3% at December 31, 2020. Moody's expect it will remain close to this level over the next 12-18 months as the company focuses on asset growth, while moderately increasing the pace of capital distributions to the parent. Moody's believes that net earning ending assets ($98.2 billion as of December 31, 2020) will rise by approximately 3% in the next twelve months. GMF has a sizeable lease portfolio making it vulnerable to a rapid decline of used car prices. Moody's expects, however, that used car prices will remain stable in 2021, benefiting from global semiconductor shortage in the automotive industry. Additional credit challenges for GMF include its exposure to the performance trends of its parent and the company's significant use of securitization, which Moody's believes will remain at historical levels despite recent shift to more unsecured debt. A relatively high use of securitization increases the amount of encumbered assets, putting pressure on the company's alternate sources of liquidity. GMF's liquidity position is good and totaled $25.6 billion as at December 31, 2020, comprising approximately $5.1 billion of cash, $19 billion from committed asset backed facilities and $1.5 billion available under other unsecured credit facilities. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS GMF's ratings could be upgraded if the ratings for its parent GM are upgraded. An unexpected and material decline in asset quality and profitability, diminished liquidity, or leverage measured as tangible common equity over tangible managed assets that declines to less than 7% could lead to a lower standalone assessment for GMF. GMF's ratings could be downgraded, following a downgrade of the ratings for its parent GM. The methodologies used in these ratings were Finance Companies Methodology published in November 2019. General Motors Financial Company, Inc. is a wholly-owned captive finance subsidiary of General Motors Company and provides retail and commercial auto finance products. GMF had a $98.2 billion portfolio of finance receivables and operating leases as of 31 December 2020. GMF provides automobile finance solutions through two segments: North America and International. The North American segment offers both retail and commercial automobile finance programs including full credit spectrum lending through GM-franchised dealers. Retail finance comprises retail installment contracts and operating lease contracts. Commercial lending products include floorplan financing and dealer loans. The International Segment focuses on financing new GM vehicles and select used vehicles, in addition to commercial lending programs to GM-Franchised dealers and their affiliates. GOODYEAR TIRE: Fitch Rates $1BB 2031/2033 Unsecured Notes 'BB-' --------------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB-'/'RR4' to The Goodyear Tire & Rubber Company's (GT) proposed issuance of $1 billion in senior unsecured notes due 2031 and 2033. Proceeds from the notes will be used to redeem GT's $1 billion in 5.125% senior unsecured notes due 2023. GT's Long-Term Issuer Default Rating (IDR) is 'BB-'; the rating Outlook is Negative. KEY RATING DRIVERS Credit Profile Post CTB Acquisition: GT's ratings reflect Fitch's expectation that the company's credit profile over the intermediate term will fall within Fitch's ratings sensitivities, despite some near-term pressure due to the Cooper Tire & Rubber Company (CTB) acquisition and continued external challenges related to the coronavirus pandemic. Supporting GT's ratings is its decision to fund the acquisition with a combination of cash on hand, stock and incremental borrowings. This, along with CTB's somewhat stronger Standalone Credit Profile, results in a relatively modest incremental weakening of GT's near-term credit profile compared with Fitch's standalone expectations, with the potential for an incrementally stronger credit profile in a few years once synergies are achieved. Negative Rating Outlook: The Negative Rating Outlook reflects Fitch's concerns that incremental borrowing associated with the acquisition and integration complexities could complicate GT's ability to strengthen its credit profile while external market conditions remain challenging. GT's FCF is likely to be negative in 2021 as the company replenishes inventories and spends on the capex deferred from 2020. The Negative Rating Outlook also reflects continued uncertainty regarding the pace of recovery in the global tire market, following the significant demand decline seen in 2020 as a result of the pandemic. Fitch expects global tire demand to rebound significantly in 2021 but to remain below 2019 levels, as ongoing global shelter-in-place orders continue to weigh on vehicle miles traveled. Fitch could downgrade GT's ratings if it appears that the company's credit profile will remain outside of its negative rating sensitivities beyond 2023. However, Fitch could revise the Outlook to Stable if it appears the company is on track to improve margins, FCF and leverage. Elevated Leverage: Fitch expects GT's pro forma gross EBITDA leverage, measured as debt/Fitch-calculated EBITDA, will be elevated, likely in the mid-4.0x range, around the time of acquisition close, but Fitch expects it to decline over the intermediate term to below 4.0x as market conditions normalize and GT realizes synergies from the acquisition. FFO leverage is likely to be more elevated in the near term, partially due to lower FFO as a result of about $175 million in rationalization payments in GT's standalone business and additional cash costs associated with the acquisition. Fitch expects FFO leverage to decline below the 4.5x negative rating sensitivity, which depends on the pace of improvement in GT's cash-generating capabilities. Negative Near-Term FCF: Fitch expects GT's FCF will likely be negative in 2021 as the company works to replenish its tire inventories, which were depleted in 2020. Also, capex is likely to be elevated as a result of spending deferred from 2020, and Fitch expects there will be some incremental cash costs associated with the CTB acquisition. Following 2021, Fitch expects GT's FCF to turn positive as working capital and capex normalize, and as the company begins to realize synergies from the acquisition. Fitch expects FCF margins to run in the 1%-3% range in 2022 and beyond. DERIVATION SUMMARY Following the CTB acquisition, GT will have a relatively strong competitive position as the third-largest global tire manufacturer, with a highly recognized brand name and a focus on the higher-margin high-value-added (HVA) tire category. However, the shift in focus has led to lower tire unit volumes and revenue, particularly in the mature North American and Western European markets. The company's diversification is increasing as rising incomes in emerging markets lead to higher demand for HVA tires, particularly in the Asia-Pacific region. GT's margins are roughly consistent with those of the other large Fitch-rated tire manufacturers, Compagnie Generale des Etablissements Michelin (A-/Stable) and Continental AG (BBB/Stable), but GT's leverage is considerably higher, as the other two companies generally maintain midcycle EBITDA leverage below 1.0x. GT's leverage is roughly consistent with that of auto suppliers in the 'BB' category, such as Meritor, Inc. (BB-/Stable). GT's margins are relatively strong compared with typical 'BB'-category issuers, but this is tempered by seasonal working capital swings that lead to more variability in FCF over the course of a year. FCF margins are also sensitive to raw material prices and capex spending. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- GT closes on the CTB transaction 2H21. -- About one-half of the $165 million in synergies are realized in 2022, with the remainder in 2023. -- Global auto production rises by 6% in 2021, including an 8% increase in the U.S. -- Global replacement tire demand largely recovers in 2021 but still remains below the 2019 level. -- Beyond 2021, GT's sales grow in the low-single digits, excluding the effect of the CTB acquisition. -- Capex is elevated in 2021, then runs near 5.5% over the next several years. -- Debt, including off-balance sheet factoring, increases to about $8.7 billion in 2021, then declines toward $7.5 billion over the next several years. -- FCF is negative in 2021, then runs in the 1%-3% range over the following years. -- The company maintains a solid liquidity position, including cash and credit facility availability. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Demonstrating continued growth in tire unit volumes, market share and pricing. -- Sustained FCF margins of 1.5%. -- Sustained gross EBITDA leverage below 3.0x. -- Sustained FFO leverage below 3.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Integration issues or unforeseen costs associated with the acquisition that inhibit the company's ability to bring its credit profile inside of its negative rating sensitivities within two years. -- A significant step-down in demand for the company's tires without a commensurate decrease in costs. -- An unexpected increase in costs, particularly related to raw materials, that cannot be offset with higher pricing. -- A decline in the company's consolidated cash below $700 million for several quarters. -- Sustained break-even FCF margin. -- Sustained gross EBITDA leverage above 4.0x. -- Sustained FFO leverage above 4.5x. BEST/WORST CASE RATING SCENARIO International scale credit 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: Fitch expects GT's liquidity to remain sufficient as the company navigates improving economic conditions following the pandemic. As of Dec. 31, 2020, the company had $1.5 billion in cash and cash equivalents, excluding Fitch's adjustments for not readily available cash, and $3.9 billion in availability on its various global credit agreements, including $2.5 billion of availability on its primary U.S. and European revolvers. The most significant near-term debt maturities are two series of senior unsecured notes that come due in 2023, with about $1.3 billion in principal outstanding. The proposed notes will refinance $1.0 billion of the 2023 maturities. According to its criteria, Fitch treats $600 million of GT's cash as not readily available, based on Fitch's estimate of the amount of cash needed to cover seasonality in the company's business. Debt Structure: GT's consolidated debt structure primarily consists of a mix of secured bank credit facilities and senior unsecured notes. As of Dec. 31, 2020, GT had $400 million in second-lien term loan borrowings and $3.55 billion in senior unsecured notes outstanding. There were no borrowings outstanding on GT's first-lien secured revolver. Goodyear Europe B.V.'s (GEBV) debt structure consisted of $307 million in senior unsecured notes and $291 million of on-balance sheet accounts receivable securitization borrowings. GEBV's secured revolver was also undrawn. GT also has various borrowings outstanding at certain non-U.S. operations, including credit facilities in Mexico and China. In addition to its on-balance sheet debt, Fitch treated $451 million of off-balance sheet factoring as debt at Dec. 31, 2020. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. GOODYEAR TIRE: Moody's Rates New $1BB Unsec. Guaranteed Notes 'B2' ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to The Goodyear Tire & Rubber Company's proposed $1 billion senior unsecured guaranteed notes. Goodyear's existing ratings, including the B1 corporate family rating, the B1-PD Probability of Default rating, the Ba2 senior secured second-lien term loan rating, the B2 senior unsecured guaranteed notes rating and the B3 senior unsecured unguaranteed notes rating, as well as Goodyear Europe B.V.'s senior unsecured guaranteed notes rating of Ba3 are all unaffected. The Speculative Grade Liquidity rating remains SGL-2. The outlook is stable. The proceeds from these notes are expected to be used to redeem the existing senior unsecured guaranteed 5.125% notes due 2023. RATINGS RATIONALE Goodyear's ratings reflect its strong global position as a manufacturer of aftermarket and original equipment tires supported by a leading market share position in North America, good scale and growth in higher-margin 17-inch and larger tires. The acquisitino of Cooper Tire & Rubber Company (Cooper Tire) strengthens Goodyear's US replacement tire position while also meaningfully boosting the original equipment tire business in China where demand is accelerating. The acquisition increases pro forma debt-to-EBITDA (including Moody's standard adjustments) towards 6x but should result in annual free cash flow of over $200 million for accelerated debt repayments. As a result, Moody's expects debt-to-EBITDA to fall towards 4x by year-end 2022. The EBITA margin is expected to rebound sharply in 2021 and resume growth in 2022 as continued cost savings and distribution synergies gain traction. The stable outlook reflects Moody's expectations for industry tire volumes to continue rebounding through 2021, leading to improved cost absorption and margins. The combined entity should generate strong cash flow sufficient to fund growth investments and debt repayment while maintaining a sizable cash position and modest reliance on revolving credit facilities. Goodyear's SGL-2 Speculative Grade Liquidity Rating is supported by Moody's expectation for maintenance of a robust cash position ($1.5 billion at December 31, 2020) and significant availability under various revolving credit facilities. At year-end 2020, the company had over $1.5 billion of availability (zero drawn) under its $2 billion asset-based lending facility (ABL) expiring 2025 and full availability under the EUR800 million revolving credit facility set to expire 2024. Moody's expects free cash flow, including Cooper Tire's accretive free cash flow profile, to comfortably exceed $200 million even with higher growth investments in working capital and capital expenditures. Moody's took the following rating action on Goodyear Tire & Rubber Company (The): New Gtd. Senior Unsecured Regular Bond/Debenture, assigned at B2 (LGD4) Adjustments: Goodyear Europe B.V. LGD Adjustment Gtd. Senior Unsecured Ba3 (to LGD3 from LGD2) FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded with improving margins, boosted by better than anticipated savings/synergies from the acquisition. The expectation that meaningful, positive free cash flow will be used for debt reduction such that debt-to-EBITDA falls to the mid-3x range or EBITA-to-interest eclipses 3x could also warrant positive rating action. Ratings could be downgraded if the EBITA margin declines to the mid-5x range, free cash flow falls well shy of Moody's expected level or debt-to-EBITDA approaches 6x. EBITA-to-interest below 2.5x could also result in a downgrade. Ratings pressure could also arise from a meaningful decline in liquidity, including increased reliance on revolving credit facilities. Goodyear's role within the automotive industry exposes the company to material environmental risks arising from increasing regulations on carbon emissions. As automotive manufacturers seek to introduce more electrified powertrains, traditional internal combustion engines will become a smaller portion of the car parc. Electric and battery electric vehicles are heavier, requiring tires to handle the increase in weight while tasking tire manufacturers to conserve raw materials with greater durability. The principal methodology used in this rating was Automotive Supplier Methodology published in January 2020. The Goodyear Tire & Rubber Company is one of the largest tire manufacturers in the world. Revenues for the year ended December 31, 2020 were approximately $12 billion. Pro forma revenues including Cooper Tire are expected to be nearly $15 billion. GREAT AMERICAN: Seeks to Hire Patrick Law Offices as Legal Counsel ------------------------------------------------------------------ Great American Treating, Inc. seeks approval from the U.S. Bankruptcy Court for the Eastern District of Texas to employ Patrick Law Offices as legal counsel in its Chapter 11 case. The firm will be paid at these rates: Attorneys $300 per hour Paralegals $75 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. The retainer fee is $21,700. Glen Patrick, Esq., a partner at Patrick Law Offices, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Glen E. Patrick, Esq. Patrick Law Offices 2495 S. Main St. Lindale, TX 75771 Tel: (903) 882-6173 Email: sherry@patricklawoffices.com About Great American Treating Great American Treating, Inc. filed a Chapter 11 bankruptcy petition (Bankr. E.D. Texas Case No. 21-60078) on March 4, 2021, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Patrick Law Offices. GREYLOCK CAPITAL: Asks Court to Dismiss Chapter 11 Case ------------------------------------------------------- Leslie A. Pappas of Bloomberg Law reports that the corporate parent of Greylock Capital Management LLC is asking to dismiss its Chapter 11 case after a federal bankruptcy watchdog challenged the multi-million dollar hedge fund's use of a streamlined process reserved for small businesses. Dismissing the case would "obviate the need for a contested matter" with the Justice Department's U.S. Trustee's Office, Greylock Capital Associates LLC said Tuesday, March 31, 2021, in a court filing. The U.S. Trustee last week said it planned to challenge Greylock's filing under Subchapter V of the bankruptcy code, which is available to companies with up to $7.5 million in debt. About Greylock Capital Greylock Capital Associates, LLC, is the parent of Greylock Capital Management, LLC, an SEC-registered alternative investment advisor, that advises pooled vehicles and separate accounts for institutional and high net worth investors. The business was founded in 2004, and its primary investment focus has been distressed debt and sovereign debt restructurings. Greylock Capital Associates sought Chapter 11 protection (Bankr. S.D.N.Y. Case No. 21-22063) on Jan. 31, 2021. The petition was signed by CEO and Chief Investment Officer Willem Humes. The Debtor was estimated to have $1 million to $10 million in assets and liabilities as of the bankruptcy filing. The Hon. Robert D. Drain is the case judge. AMINI LLC, led by Jeffery Chubak, is the Debtor's bankruptcy attorney. GRIDDY ENERGY: Resists Customers' Bid for Official Committee ------------------------------------------------------------ Law360 reports that Texas electricity provider Griddy Energy LLC objected Wednesday, March 31, 2021, to a motion from a group of its customers to have two committees appointed in the company's Chapter 11 case, saying it would add significant cost to the Chapter 11 case and eat into recoveries for creditors. In its filing, Griddy argued that creating a customers committee and a committee of disputed tort claimants doesn't make sense in this case because it would cost a lot of money the estate doesn't really have and would negatively impact all parties involved. About Griddy Energy California startup Griddy Energy is an American power retailer that formerly sold energy to people in the state of Texas at wholesale prices for a $9.99 monthly membership fee and had approximately 29,000 members. Griddy was a feature of Texas' unusual, deregulated system for electric power. The vast majority of Texans -- and Americans -- pay a fixed rate for electric power and get predictable monthly bills. However, Griddy works by connecting customers to the wholesale market for electricity, which can change by the minute and is more volatile, for a monthly fee of $9.99. During February 2021's winter storm in Texas, power generators failed and demand for heating shot up. In response, ERCOT raised the price of electricity to the legal limit of $9 per kilowatt-hour and kept it there for several days. Griddy customers who didn't lose power were hit with massive electric bills that were auto-debited from their bank accounts. State grid operator ERCOT at the end of February 2020 cut off the Griddy's access to customers for unpaid bills following the Texas freeze. The Texas attorney general also said it is suing Griddy, saying it engaged in deceptive trade practices by issuing excessive bills. Griddy Energy filed a chapter 11 bankruptcy petition (Bankr. S.D. Tex. Case No. 21-30923) on March 15, 2021. Griddy estimated $1 million to $10 million in assets and $10 million to $50 million in liabilities as of the bankruptcy filing. Griddy is represented by Baker Botts LLP as legal counsel. Griddy is represented by Crestline Solutions, LLC and Scott Pllc as public affairs advisors. Stretto is the claims agent. GTT COMMUNICATIONS: Note Forbearance, Loan Extended to April 15,202 ------------------------------------------------------------------- GTT Communications said in a regulatory filing that it extended its forbearance agreement with credit facility lenders and noteholders to April 15, 2021. On March 29, 2021, the Company and the guarantors under the Indenture, dated as of December 22, 2016, by and between the Company, as successor by merger to GTT Escrow Corporation, and Wilmington Trust, National Association, as Trustee, entered into a First Amendment to the Noteholder Forbearance Agreement with certain beneficial owners of a majority of the outstanding aggregate principal amount of the Company’s outstanding 7.875% Senior Notes due 2024 (the "Notes"). Also on March 29, 2021, the Company and GTT B.V. entered into a Third Lender Forbearance Agreement and Amendment No. 5 to Credit Agreement and Consent to that certain Credit Agreement, dated as of May 31, 2018, by and among the Company and GTT B.V., as borrowers, KeyBank National Association, as administrative agent and letter of credit issuer (the "Agent"), and the lenders and other financial institutions party thereto from time to time, with the other credit parties party thereto, the lenders party thereto holding (1) a majority of the outstanding loans and revolving commitments under the Credit Agreement ("Required Lenders") and (2) a majority of the revolving commitments under the Credit Agreement ("Required Revolving Lenders") and the Agent. The forbearance was previously set to expire on March 31, 2021. GTT also paid fees and expenses of certain advisers to the lender group and its loan agent, the filing said. The company is currently negotiating with stakeholders around a deleveraging plan, which could include filing for bankruptcy after the close of its infrastructure unit sale, Bloomberg News previously reported. About GTT Communications Headquartered in McLean, Virginia, GTT Communications, Inc. -- http://www.gtt.net/-- owns and operates a global Tier 1 internet network and provides a comprehensive suite of cloud networking services. * * * As reported by the TCR on March 1, 2021, S&P Global Ratings lowered all of its ratings on U.S.-based internet protocol network operator GTT Communications Inc. by one notch, including its issuer credit rating, to 'CCC-' from 'CCC', to reflect the increased likelihood of a default or distressed exchange over the next six months. In December 2020, Moody's Investors Service downgraded GTT Communications, Inc's corporate family rating to Caa2 from B3. The downgrade reflects the continued delays in the company reaching an agreement with its lenders over a long-term cure of its reporting requirements which GTT is in breach of due to recently discovered accounting issues which have led to the company being unable to file its Q2 and Q3 financial reports. HENRY FORD VILLAGE: Med Healthcare Has $69M Opening Bid ------------------------------------------------------- Chuck Sudo of Senior Housing News reports that Henry Ford Village announced that it agreed to a $69 million stalking horse bid -- a move which signals a potential exit from Chapter 11 bankruptcy protection for the 1,038-bed nonprofit continuing care retirement community (CCRC) in Dearborn, Michigan. The bidder is MED Healthcare Partners, a provider of assisted living, skilled nursing services and rehabilitation services with a portfolio of over 150 skilled nursing facilities, 20 assisted living and memory care communities, and five CCRCs in 20 states. The firm is headed by Ephram "Mordy" Lahasky of Hewlett, New York. HFV filed for Chapter 11 bankruptcy protection in November of 2020. Filing documents listed a litany of challenges the CCRC faced over the years including increased competition, the 2008 housing crisis and Great Recession, and the bankruptcies of nearby General Motors and Chrysler which adversely impacted the number of seniors able to sell their homes to finance a move to the campus, located on the site of automaker Henry Ford’s birthplace. A 2014 class action lawsuit resulted in a settlement agreement in 2019, where HFV and other defendants agreed to pay $800,000. A possible refinancing of the community's debt last year was derailed by the coronavirus pandemic, which also placed further pressures on operational costs and occupancy. The CCRC filed a motion seeking relief from the class action settlement last October. The court rejected the motion, leading HFV to file for bankruptcy. A stalking horse bid is the initial bid on the assets of a bankrupt asset, effectively establishing a low-end bidding floor once the building goes up for auction and ensuring that bidders cannot underbid the purchase price. By setting the bidding floor, the bankrupt asset seeks to realize a higher profit at auction. Other buyers can submit competing offers, but by placing the stalking horse bid, the bidder is granted certain incentives including expense reimbursement, breakup fees, exclusivity for a set period of time, negotiate the terms of an acquisition and choose what parts of a bankrupt asset it wishes to buy. Moreover, the stalking horse bidder can negotiate bidding options that discourage competitors from bidding. MED Healthcare Partners is no stranger to stalking horse bids. In February 2020, the firm entered a stalking horse agreement for Mount Royal Towers, a CCRC in Birmingham, Alabama. "We're pleased to establish a solid baseline bid at this stage of our restructuring as we move our community forward towards successfully emerging bankruptcy in a manner that maintains the health, safety and lifestyle of our residents for years to come," HFV Chief Restructuring Officer Chad Shandler said in a statement. About Henry Ford Village Henry Ford Village, Inc., is a non-profit, non-stock corporation established to operate a continuing care retirement community located at 15101 Ford Road, Dearborn, Mich. It provides senior living services comprised of 853 independent living units, 96 assisted living units and 89 skilled nursing beds. Henry Ford Village sought Chapter 11 protection (Bankr. E.D. Mich. Case No. 20-51066) on Oct. 28, 2020. In the petition signed by CRO Chad Shandler, Henry Ford Village was estimated to have $50 million to $100 million in assets and $100 million to $500 million in liabilities. The Hon. Mark A. Randon is the case judge. The Debtor has tapped Dykema Gossett PLLC as its legal counsel and FTI Consulting, Inc., as its financial advisor. Kurzman Carson Consultants, LLC, is the claims agent. HOPLITE INC: Case Summary & 11 Unsecured Creditors -------------------------------------------------- Debtor: Hoplite, Inc. 506 N Croft Ave Los Angeles, CA 90048-2511 Chapter 11 Petition Date: April 1, 2021 Court: United States Bankruptcy Court Central District of California Case No.: 21-12663 Judge: Hon. Sheri Bluebond Debtor's Counsel: Richard Baum, Esq. LAW OFFICES OF RICHARD T BAUM 11500 W Olympic Blvd Ste 400 Los Angeles, CA 90064-1525 Tel: (310) 277-2040 Fax: (310) 286-9525 Estimated Assets: $0 to $50,000 Estimated Liabilities: $10 million to $50 million The petition was signed by Jon Smith, president. A copy of the petition containing, among other items, a list of the Debtor's 11 unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/PXV5EBY/Hoplite_Inc__cacbke-21-12663__0001.0.pdf?mcid=tGE4TAMA HOWARD HUGHES: Moody's Affirms Ba2 CFR on Continued Improvement --------------------------------------------------------------- Moody's Investors Service affirmed The Howard Hughes Corporation's Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating, and Ba3 ratings on the company's senior unsecured notes. The outlook remains stable. In addition, Moody's maintained the company's Speculative Grade Liquidity Rating at SGL-3. "The affirmation of the ratings reflects Moody's expectation for continued improvement in Howard Hughes' operating fundamentals, its strategic and valuable land portfolio, and sizable cash position," said Emile El Nems, a Moody's VP-Senior Analyst. "In addition, over the past year, The Howard Hughes management team has effectively balanced the interests of creditors with the interest of its shareholders by materially improving its liquidity by issuing equity, investing in the business, and pushing out debt maturities." Affirmations: Issuer: Howard Hughes Corporation (The) Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Senior Unsecured Notes, Affirmed Ba3 (LGD5) Outlook Actions: Issuer: Howard Hughes Corporation (The) Outlook, Remains Stable RATINGS RATIONALE Howard Hughes' Ba2 corporate family rating reflects the company's position as a leading US homebuilder with a diversified portfolio of assets and growing profitability from income producing properties. In addition, Moody's credit rating is supported by more than $3.7 billion in book equity and a valuable land portfolio located in some of the most desirable metropolitan areas in the US. At the same time, Moody's rating takes into consideration the company's high debt leverage, revenue volatility and risks associated with its commercial real estate business. The stable outlook reflects Moody's expectation that the company will maintain a prudent approach to its balance sheet management and liquidity profile, and materially grow revenue and profitability this year and next. This is largely driven by Moody's views that the US economy will improve sequentially and that the US construction industry will remain stable and supportive of the company's underlying growth drivers. Howard Hughes' SGL-3 Speculative Grade Liquidity rating reflects Moody's expectation of an adequate liquidity profile over the next 12 to 18 months. At December 31, 2020, the company had more than $1 billion in cash. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if: Adjusted total-debt-to capitalization is below 40% for a sustained period of time EBITDA-to-interest expense is approaching 4.0x If the company improves its free cash flow and liquidity profile The ratings could be downgraded if: Adjusted total-debt-to capitalization is above 55% for a sustained period of time EBITDA-to-interest expense is below 2.0x for a sustained period of time The company's liquidity profile deteriorates The principal methodology used in these ratings was Homebuilding And Property Development Industry published in January 2018. Headquartered in Houston, Texas, The Howard Hughes Corporation was spun off from General Growth Properties in November 2010. The company operates in three different segments: lot sales to homebuilders from its own master planned communities (MPC); rental and other income from developed mixed use properties (referred to as the Operating Assets segment); and Strategic Developments, which include mixed use properties held for future development and redevelopment. HUNT COMPANIES: Moody's Assigns B2 CFR, Outlook Stable ------------------------------------------------------ Moody's Investors Service affirmed Hunt Companies, Inc.'s B2 senior secured note. Moody's also assigned a B2 to its corporate family rating and its new B2 senior secured note of $635 million due in 2029, which is currently being marketed. The rating outlook is stable. The following rating was affirmed: Issuer: Hunt Companies, Inc. Senior secured note at B2 The following rating was assigned: Issuer: Hunt Companies, Inc. Corporate family rating at B2 $635 million senior secured note at B2 Outlook Action: Issuer: Hunt Companies, Inc. Rating Outlook is stable RATINGS RATIONALE Hunt's B2 senior secured debt rating reflects its opportunistic growth strategy and the inherent risk in its cash flow generation - an income stream from highly levered diversified commercial real estate and financial services businesses coupled with the integration of newly acquired and recently expanded significant strategic initiatives. The continued capital events mask historical performance, impact earnings visibility and create significant volatility in revenues and earnings. The rating also takes into account Hunt's very complex organizational structure. Leverage, including effective leverage remains high. Hunt's net debt to EBITDA and total debt plus preferred to gross assets were 13.7x and 71.1%, respectively at Q3 2020. Secured debt to gross assets was very high at 69%, reflecting Hunt's secured financing strategy with a nearly fully encumbered portfolio, which decreases its financial flexibility. Moreover, Hunt's access to capital is considered weak, reflecting the firm's credit profile and limited track record in the broader capital markets. Moody's expects Hunt to use the net proceeds from the new senior secured note to redeem the existing $600 million senior secured note due in 2026, with the excess cash used for general corporate purpose. Positively, the refinancing of the senior secure note will extend the debt maturity to 2029 from 2026. Pro-forma for the new $635 million senior secured note, Moody's expects Hunt's leverage and fixed charge coverage to remain near the current level as the modestly higher debt balance will be offset by the additional cash on hand from the refinancing and the anticipated lower interest rate on the new debt. At Q3 2020, Hunt's fixed charge coverage was 1.4x. However, Moody's expects Hunt to operate between 1.5x to 2.0x on a sustained basis. Hunt's liquidity position reflects its limited sources and a fully encumbered pool of assets. However, as of September 30, 2020, the firm had approximately $335 million in cash and cash equivalents, of which nearly $206 million is from unrestricted subsidiaries. Hunt also has a $50 million revolving credit facility, which as of 3Q20 was fully available and has access to an additional $35 million credit facility ($25 million available as of September 30,2020) from one of its subsidiaries (Hunt Communities). The firm's debt maturities are manageable over the next 12 months. The stable rating outlook incorporates Moody's expectations that Hunt will be managed with a leverage profile commensurate with B2 peers, while recurring EBITDA excluding non-cash and non-recurring items will continue to cover interest expense at 1.4x or higher and that the recent capital investments will result in increasing earnings stability and modestly reduce leverage. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A future rating upgrade for Hunt would be predicated on greater visibility and predictability of recurring earnings. The upgrade would also require unencumbered assets greater than 20% of total assets, a fixed charge coverage ratio consistently above 1.6x (excluding non-cash and non-recurring items), Net Debt/Recurring EBITDA consistently below 10x, and secured debt level less than 50% of gross assets. Growth in existing or synergistic businesses, which improves the scale and profitability of the company's operations could also be viewed positively. Moody's could downgrade Hunt if its fixed charge ratio falls below 1.4x (excluding non-cash and non-recurring items), Net Debt/Recurring EBITDA consistently above 15x or a significant deterioration in the performance or outlook of any one of the company's core businesses. The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. Founded in 1947, Hunt Companies, Inc. is a privately owned company headquartered in El Paso, Texas. At September 30, 2020, the company reported - including consolidated non-controlling interests - total assets of $4.9 billion and total equity of $341.5 million. HUNTER FAN: Moody's Assigns 'B2' CFR & First Lien Debt 'B2' ----------------------------------------------------------- Moody's Investors Service assigned ratings to Hunter Fan Company, including a B2 Corporate Family Rating and a B2-PD Probability of Default Rating. Concurrently, Moody's assigned a B2 rating to the company's proposed senior secured first lien credit facilities, consisting of a proposed $33 million first lien revolver due 2026 and a $425 million first lien term loan due 2028. The outlook is stable. Net proceeds from the proposed $425 million term loan, after paying fees and expenses, are expected to be used to refinance approximately $327 million of existing debt, and to pay an $85 million dividend distribution to shareholders. All ratings are subject to Moody's final review of the documentation. Reinstatements: Issuer: Hunter Fan Company Probability of Default Rating, Reinstated to B2-PD Corporate Family Rating, Reinstated to B2 New Assignments: Issuer: Hunter Fan Company Senior Secured 1st Lien Revolving Credit Facility, Assigned B2 (LGD3) Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3) Outlook Actions: Issuer: Hunter Fan Company Outlook, Reinstated To Stable From Rating Withdrawn RATINGS RATIONALE Hunter Fan's B2 CFR broadly reflects its strong market position in the residential ceiling fan category, aided by its over 135 year history tempered by an aggressive financial policy. The company benefits from long-standing relationships with its key retail partners and its growing ecommerce business. Demand for the company's products was very strong for most of 2020, driven by consumers' increased spending in their homes and accelerated shift to online shopping due to the coronavirus outbreak. Moody's expects consumer demand will continue to be elevated at least through the first half of 2021, supported by a solid US housing market, and the company is well positioned to continue benefiting from the shift in consumer spending to online. Hunter Fan's asset light business model and sizable ecommerce business, which carries higher margin than in-store sales, supports its relatively strong EBIT margin and interest coverage, and results in positive free cash flow generation. The company's good liquidity reflects Moody's expectations for positive free cash flow in the $35-$40 million range over the next 12-18 months, access to a $33 million revolver expiring in 2026, and lack of meaningful debt maturities until before the revolver expires. Hunter Fan's credit profile also reflects its high financial leverage with debt/EBITDA at around 4.8x as of the last twelve months period (LTM) ending January 31, 2021, and pro forma for the proposed transaction. The company is relatively small with revenue of $361 million, and has a narrow product focus with the vast majority of revenue related to the sales of residential ceiling fans. Hunter Fan is exposed to the cyclical US housing market and economic downturns given the discretionary nature of its products. Moody's expects elevated demand because of increased spending on home-related products during the pandemic to moderate along with a recovery in the economy since some spending will shift back to items such as travel. Moody's also believes growth prospects for ceiling fans are moderate. The company has high customer concentration with its to 5 customers representing about three quarters of annual revenue, and its cash flows are highly seasonal, centered around the summer months. The company outsources the majority of its manufacturing to a single vendor in China, exposing its supply chain to potential issues affecting the region as well as trade factors such as tariffs. The B2 rating assigned to the company's proposed senior secured first lien credit facilities, the same as the CFR, reflects that these facilities represent the preponderance of the company's capital structure. The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of Hunter Fan from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The consumer durables industry is one of the sectors most meaningfully affected by the coronavirus because of exposure to discretionary spending. Environmental considerations include responsible land, water and energy usage in manufacturing. Factors such as responsible sourcing help protect Hunter Fan's brand image and valuable relationships with its retail partners. Governance factors primarily relate to the company's aggressive financial policies under private equity ownership, including high financial leverage and its history of debt financed shareholder distributions. The proposed dividend is the third distribution since November 2019, with the $234 million total amount representing more than half of the company's debt. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectations that continued good consumer demand for the company's products will support stable revenue and earnings over the next 12-18 months, resulting in good free cash flow generation of $35-40 million. The stable outlook also reflects Moody's expectations that the company will maintain at least good liquidity. Ratings could be upgraded if the company profitably increases its revenue scale, maintains debt/EBITDA below 4.0x and free cash flow/debt percentage in the high single digits. A ratings upgrade would also require the company maintaining at least good liquidity, and Moody's expectations of balanced financial policies that support credit metrics at those levels. Ratings could be downgraded if revenue or profit margin deteriorates, or if debt/EBITDA is sustained above 5.5x. Ratings could also be downgraded if liquidity deteriorates highlighted by negative to modest free cash flow generation on an annual basis or increased reliance on the revolver facility, or if the company completes a debt financed acquisition or shareholder distribution that materially increases leverage. The proposed first lien credit agreement contains provisions for incremental debt capacity up to the greater of $75.0 million and 75% of consolidated pro forma trailing four quarter consolidated EBITDA, plus additional amounts subject to a pro forma first lien secured net leverage requirement not to exceed first lien net leverage at close (if pari passu secured). The incremental can also be used to finance a permitted acquisition or investment, with a requirement not to increase first lien net leverage on a pro forma basis. No portion of the incremental term loans may be incurred with an earlier maturity date than the initial term loans. Moody's estimates the incremental first lien net leverage that the company can incur at closing adds about 1.0x of first lien net leverage. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees subject to protective provisions which only permit guarantee releases in connection with bona fide transactions with third parties. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacities, subject to "blocker" provisions preventing unrestricted subsidiaries from owning or holding exclusive rights in intellectual property that is material to the business of the company and its restricted subsidiaries, other than in connection with certain bona fide business purpose transactions. In addition, the asset-sale proceeds prepayment requirement has no ratio based step-downs, with the right to reinvest or commit to reinvest within 12 months. The proposed terms and the final terms of the credit agreement can be materially different. Headquartered in Memphis, TN, Hunter Fan is a leading designer and distributor of branded residential and commercial ceiling fans, and residential lighting. Since 2007, the company is majority owned by MidOcean Partners. Revenue for the last twelve months period (LTM) ending January 31, 2021 is $361 million. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. HYDRX FARMS: Cannabis Producer Starts CCAA Proceedings ------------------------------------------------------ Hydrx Farms Ltd. and affiliates Cannscience Innovations Inc. and Scientus Pharma Inc., commenced court-supervised restructuring proceedings under the Companies' Creditors Arrangement Act. Schwartz Levitsky Feldman Inc. was appointed monitor of the Companies pursuant to the initial order of the Ontario Superior Court of Justice dated March 22, 2021. The Initial Order granted a stay of proceedings until March 31, 2021. According to the Monitor's first report, to date, Hydrx has accumulated losses in excess of CA$55,000,000, and its operations are basically shut down due to liquidity problems. Hydrx is unable to process inventory, pay suppliers or commit to new sales contracts without an immediate cash injection. All of Hydrx's employees have been laid off (the majority were laid off in March 2020) and only a few consultants (from FRC's Canntab Therapeutics Limited) remain with the company to maintain the company's license and standing with Health Canada. Hydrx currently owes CA$2,300,000 to a number of suppliers and third-party service providers. In addition, Hydrx was and remains unable to repay the secured debenture from Aphria Inc. In August 2017, Hydrx financed its operations through the issuance of a convertible debenture from Aphria Inc. for CA$11,500,000 and the issuance of shares to raise in excess of CA$86,000,000. After July 2020, World Class Extractions ("WCE"), a public company specializing in extraction technologies in the cannabis industry, and exempt market dealer First Republic Capital Corp. ("FRC") purchased and took an assignment of the Aphria Secured Debenture for CA$5,000,000 through a company called Cobra Ventures Inc. In December 2020, Cobra made a formal demand on Hydrx for the repayment of the Aphria Secured Debenture and issued a Notice of Intention to enforce its security under Subsection 244(1) of the Bankruptcy and Insolvency Act. Copies of the initial order and other related documents in connection with the CCAA proceedings have been posted on the Monitor's Web site at: http://www.slfinc.ca/corporate/engagements/ The Monitor can be reached at: Schwartz Levitsky Feldman Inc. Attn: Alan Page 2300 Yonge Street, Suite 1500 Toronto, Ontario M4P 1E4 Tel: 416-785-5353 Email: Alan.page@slf.ca The Monitor has retained independent counsel: PALIARE ROLAND ROSENBERG ROTHSTEIN LLP The Companies retained as counsel: Minden Gross LLP 2200 - 145 King Street West Toronto, Ontario M5H 4G2 Raymon M. Slattery Tel: 416-369-4149 E-mail: rslattery@mindengross.com Sepideh Nassabi Tel: 416-369-4323 E-mail: snassabi@mindengross.com About Hydrx Farms Hydrx Farms Ltd. -- https://hydrx.ca/ -- is a vertically-integrated biopharmaceutical company focusing to develop and commercialize pharmaceutical-grade cannabinoid derivative products. Hydrx operates out of a 46,000 square foot facility which it owns at 1130 Champlain Court, Whitby, Ontario. Canada's The Cannabis Act regulates the possession, cultivation, production, distribution, sale, research, testing, import and export, and promotion of cannabis-based products. Hydrx was approved by Health Canada for Controlled Dry Substances Licensed Dealer in October 2016 and subsequently received a Licensed Product Cultivation License in September of 2017 which was subsequently amended to include, among other things: (i) cultivation; (ii) the sale of dried flowers; (iii) the processing of capsules and oils; and (iv) the sale of captures and oils; and (v) the processing and sale of edibles and extracts. II-VI INC: Fitch Puts 'BB' LongTerm IDR on Watch Negative --------------------------------------------------------- Fitch Ratings has placed II-VI Inc.'s 'BB' Long-Term Issuer Default Rating (IDR), 'BB+'/'RR1' senior secured and 'BB'/'RR4' senior unsecured rating on Rating Watch Negative. The Negative Watch reflects the potential Fitch will affirm or downgrade the company's ratings following receipt of detailed capital structure and operating plans for the company's planned $7.1 billion acquisition of Coherent, Inc. Pro forma total leverage could be as high as 8.0x excluding $1.5 billion committed from Bain Capital or the optional $650 million additional investment and synergies. II-VI's LTM Dec. 31, 2020 leverage was 2.2x, below Fitch's 2.5x-3.5x gross leverage sensitivities, reflecting the company's 1Q21 equity and preferred stock raise and subsequent repayment of Finisar acquisition debt. II-VI has committed to achieving 3.0x gross leverage within two years of the transaction close and the optional commitment may help achieve this target. The company also may raise equity financing as it did in 2020 to further reduce leverage. KEY RATING DRIVERS Compelling Combination: The combination of II-VI and Coherent will improve II-VI's end-market diversification, which had become concentrated in communications applications following the Finisar merger. Communications revenue will decrease from 68% LTM Dec. 31, 2020 to 48%, driven by 3-8 percentage point increases in life sciences, materials processing and semicap end-market applications. Greater diversification should reduce earnings volatility and de-risk the revenue base relative to specific product and end-market cycles. The combined entity will enjoy scale that is approximately 1.5x to 3.5x greater than its principal competitors. Increased scale should lead to higher manufacturing efficiency, enhanced supply chain procurement, and the benefits of infeed - reflected in structurally higher gross margins. Additionally, R&D scale which is 2.5x to 3.5x greater than main competitors (based on pro forma combined LTM Dec. 31, 2020 R&D expense, pre-synergy) should enable II-VI to not only achieve greater development efficiencies but also position the combined entities to benefit from key secular trends. Synergy Potential: II-VI is projecting achieving $250 million in cost synergies within three years enabling the company to increase operating EBITDA margin from approximately 20% to a 27%-29% range over the rating horizon. II-VI is targeting 60% of the synergies from gross margin improvement via procurement, infeed and supply chain functional savings, and the balance of 40% through R&D efficiencies and consolidation of corporate and functional operating expense. II-VI has a demonstrated track record of exceeding its synergy targets with the Finisar transaction. With Finisar, the company originally projected $150 million in cost savings within 36 months having achieved $110 million on a run rate basis as of Dec. 31, 2020 putting the company on track to achieve $150 million within 24 months versus the original 36 months and allowing the company to increase its synergy target to $200 million overall. The company is delivering on these goals despite the impacts of COVID-19, trade bans impacting large customers, including Huawei and ZTE, and delayed qualification of the acquired Sherman, TX 3D sensing facility. Leverage Profile: II-VI is acquiring Coherent for approximately $7.1 billion representing a PF EV multiple of 17.4x based on LTM Dec. 31, 2020 adjusted EBITDA and $250 million of pro forma synergies. Before consideration of Bain Capital's committed $1.5 billion or optional $650 million commitment and potential use toward reducing leverage, pro forma total leverage will be 8.1x. LTM Dec. 31, 2020 leverage at II-VI was 2.2x versus Fitch's 2.5x-3.5x gross leverage sensitivities, reflecting the company's 1Q21 equity and preferred stock raise and subsequent repayment of approximately $715 million principal outstanding term loan B (TLB) associated with the Finisar transaction. II-VI undertook the transaction to reduce leverage, compensating for underperformance of the Finisar transaction due to COVID-19, competitor trade bans and other issues previously discussed. II-VI has committed to achieving 3.0x gross leverage within two years post-closing, which is expected to close by calendar year end 2021 corresponding with II-VI's 2Q22. Based upon Fitch's growth and margin estimates for the combined entity, Fitch sees II-VI reducing leverage to just above Fitch's 3.5x negative sensitivity within two years of transaction closing absent additional debt repayment afforded by the committed $1.5 billion from Bain Capital and optional $650 million additional Bain investment or subsequent equity raises. Integration Risk: While the PF capital structure remains uncertain at this time, Fitch believes II-VI's stated commitment, unchanged financial policy (the company continues to target a net leverage ratio of 2.0x-3.0x), and track record with Finisar strongly suggests the company will bring its leverage in line with Fitch's rating sensitivities within two years post-close. That said, integration risk remains a key risk factor. In effect, II-VI will be integrating Coherent while still executing on its Finisar synergy plan, of which it has delivered on approximately 55% of run rate cost savings as of Dec. 31, 2020. Coherent's revenue and margin profile are roughly comparable to Finisar's at the time of its acquisition ($1.285 billion revenue and $175 million adjusted EBITDA LTM Oct. 28, 2018). II-VI's performance in 2021 is approximately 22% weaker on top line and 35% weaker on margin relative to expectations at the time of the Finisar transaction. The company's disciplined management has led to CFO being only 10% weaker than forecast and FCF being 16% stronger. Underperformance has been largely due to external factors, many of which have resolved. However, to the extent Coherent's business case takes longer to perform or there are additional exogenous shocks, II-VI will likely be unable to achieve its leverage target, pressuring credit protection metrics. DERIVATION SUMMARY II-VI combined with Finisar is one of the largest global photonics and compound semiconductor companies. The proposed combination with Coherent would further enhance the scale, market position and technology of II-VI to address product needs arising from major secular trends. The transaction will diversify II-VI's end-market exposure primarily by reducing communications applications by 20 percentage points and will provide increased scale relative to photonics market competitors and provide sizable synergy opportunities through procurement, infeed and supply chain functional COGS savings and R&D, corporate overhead and functional operating expense savings. II-VI has demonstrated its track record in delivering on comparable synergy targets associated with its prior Finisar acquisition. However, the integration and realization of full targeted $200 million in synergies remains ongoing. Fitch sees risk that II-VI's business case for Coherent could be delayed as it was for Finisar leading to credit protection metrics that remain above Fitch's negative rating sensitivities beyond a two-year horizon, particularly if there are unforeseen exogenous shocks as was the case following the Finisar acquisition. However, II-VI has committed to achieving 3.0x gross leverage within two years of the transaction close. Fitch assigns 0% equity credit to the company's convertible debt notes. Fitch assigns 100% equity credit to mandatorily convertible preferred stock. No parent-subsidiary linkage or operating environment factor was in effect for these ratings. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Approximately $3 billion in revenue and 26% to 27% operating EBITDA in fiscal 2021; -- Stand-alone II-VI revenue growth of high single- to low double-digit beyond fiscal 2021 with relatively stable operating EBITDA margin; -- Coherent revenue and margin assumptions in line with market consensus; -- Attainment of $250 million in run rate cost synergies within three years of closing; -- Use of optional proceeds and/or subsequent equity raise to achieve 3.0x gross leverage target within two years post close; -- No share repurchases or additional M&A over the rating horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Fitch does not anticipate positive rating action pending additional information concerning the pro forma capitalization of the proposed Coherent acquisition. -- Total debt with equity credit/operating EBITDA sustained below 2.5x; -- FCF margin sustained above 5%; -- Demonstrated traction in key growth businesses; -- Commitment to a more conservative financial policy. Factors that could, individually or collectively, lead to negative rating action/downgrade: Fitch could resolve the Watch Negative pending receipt of additional information concerning II-VI's pro forma capital structure and operating plan relative to Fitch's rating sensitivities. -- Total debt with equity credit/operating EBITDA sustained above 3.5x; -- FCF margin approaching neutral; -- Near-term growth market challenges; -- Shift to a more aggressive financial policy. BEST/WORST CASE RATING SCENARIO International scale credit 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 II-VI had $835 million of cash at Dec. 31, 2020. The company continues to expect to operate with approximately $300 million-$400 million in cash in the normal course of business before giving rise to the Coherent transaction. Liquidity is supported by the $450 million senior secured revolving credit facility, which was undrawn at Dec. 31, 2020. Fitch expects II-VI will generate $400 million FCF in fiscal 2021. The Term Loan A matures in September 2024. II-VI's repaid its Term Loan B in 1Q21. The TLA has a springing maturity to 120 days inside II-VI's $345 million convertible maturing Sept. 1, 2022, if available liquidity (defined as unrestricted cash on hand plus borrowing availability under the revolver) is less than the remaining principal. Fitch expects II-VI's projected liquidity profile will satisfy the available liquidity requirement. II-VI has indicated it has obtained approximately $5.4 billion in fully committed debt financing in conjunction with its planned acquisition of Coherent. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. KNS ACQUISITION: Moody's Assigns First Time B2 Corp Family Rating ----------------------------------------------------------------- Moody's Investors Service assigned first-time ratings for KNS Acquisition Corp. ("Nutrisystem") including a B2 Corporate Family Rating, a B2-PD Probability of Default Rating, and B1 ratings on $632 million of proposed senior secured first lien credit facilities consisting of a revolver and term loan. The rating outlook is stable. The rating assignments reflect elevated leverage (projected pro-forma debt-to-EBITDA of 5.1x) and small scale with projected revenues of less than $1 billion (pro-forma for the Direct Digital, LLC "Adaptive Health" merger). The liquidity position is good with expectations to hold nominal cash on the balance sheet and good projected free cash relative to required term loan amortization, along with an undrawn $75 million revolving credit facility that could be used to partially fund future acquisitions. The ratings assignments follow the company's plan to raise new senior secured debt comprised of a $75 million senior secured first lien revolver expiring in 2026 and a $557 million senior secured first lien term loan expiring in 2028. The company will utilize the net proceeds to refinance existing debt put in place to help fund Kainos Capital's acquisition of Nutrisystem for $575 million in December 2020 and to partially finance the proposed $557 million merger with Adaptive Health. The following ratings/assessments are affected by the action: New Assignments: Issuer: KNS Acquisition Corp. Corporate Family Rating, Assigned B2 Probability of Default Rating, Assigned B2-PD Senior Secured 1st Lien Term Loan, Assigned B1 (LGD3) Senior Secured 1st Lien Revolving Credit Facility, Assigned B1 (LGD3) Outlook Actions: Issuer: KNS Acquisition Corp. Outlook, Assigned Stable RATINGS RATIONALE KNS Acquisition Corp.'s B2 CFR reflects the company's good profitability, predictable free cash flow generation, and highly diversified customer base. Offsetting these factors are the company's relatively small scale with revenues less than $1 billion pro-forma for the merger with Adaptive Health and high financial leverage, estimated to be 5.1x debt to EBITDA on a Moody's adjusted basis pro-forma for the merger and prior to synergies as of December 31, 2020. Moody's projects debt-to-EBITDA will decline to a mid-4x range over the next 12-to-18 months due to synergy realization and reinvestment of free cash flow for acquisitions. Competition within health & wellness is very high as Nutrisystem faces competition from many other meal delivery services that focus on nutrition & wellness. Revenues have historically been volatile, as the company experienced revenue declines from 2007 to 2013, during a post-recession period, and then again from 2017 to 2018, when it was acquired by Tivity Health. Given the competitiveness of the category, marketing strategy is very important. Nutrisystem plans to utilize Adaptive Health's proprietary direct-to-consumer marketing platform to reduce its customer acquisition costs and acquire higher value customers. Customer acquisition is very important for Nutrisystem, as new customers represent over 60% of the company's revenues. Moody's expects that KNS Acquisition Corp will operate with good liquidity. This incorporates the rating agency's estimate of $10 million of pro-forma cash, $50 million of annual projected free cash flow in 2021, undrawn capacity on the $75 million revolver, and no meaningful debt maturities through 2026. The cash sources provide ample resources for the $5.57 million of required annual amortization, reinvestment needs and potential acquisitions. The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of corporate assets from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around Moody's forecasts is unusually high. Notwithstanding, Nutrisystem is likely to be more resilient than companies outside of the packaged food and VMS sectors, although some volatility can be expected through 2021 due to uncertain demand characteristics, channel shifting, and the potential for supply chain disruptions and difficult comparisons following these shifts. Moody's regard the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Governance risk includes KNS Acquisition Corp's financial strategies, which Moody's view as aggressive given its high financial leverage, private equity ownership and focus on growth through acquisitions that can lead to increased debt and integration risks. Environmental considerations are not material considerations in the rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectation that Nutrisystem will successfully integrate its merger with Adaptive Health. Furthermore, Moody's assumes in the outlook that Nutrisystem will grow its revenues and EBITDA in a low single digit percentage range through continued new customer growth and retention, and generate at least $40 million of annual free cash flow. Nutrisystem's ratings could be upgraded if there is a material diversification in the company's product profile, good liquidity is maintained, and the company is able to sustain debt-to-EBITDA below 4.0x. Ratings could be downgraded if operating performance weakens through factors such as market share losses, pricing pressure or increased marketing spending, liquidity deteriorates, or debt-to-EBITDA is sustained above 5.5x. Debt-financed acquisitions or shareholder distributions could also lead to a downgrade. The proposed first lien credit agreement contains provisions for incremental debt capacity up to the greater of $150 million and 100% of trailing four quarter consolidated EBITDA calculated on a pro forma basis, plus the unused portion of the General debt basket, plus an additional amount subject to pro forma first lien net leverage ratio not to exceed the first lien net leverage ratio at closing. Amounts up to the $150 million may be incurred with an earlier maturity date than the initial term loans. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacities, subject to "blocker" provisions which prohibit the transfer to, or ownership or licensing by unrestricted subsidiaries of intellectual property material to the borrower and restricted subsidiaries, taken as a whole. Only wholly owned subsidiaries must provide guarantees; partial dividend of ownership interest could jeopardize guarantees if subsidiary guarantors cease to be wholly-owned subject to limitation prohibiting such release except pursuant to the formation of a bona fide JV with an unaffiliated third party that either ceases to be a direct or indirect subsidiary of the borrower, or the transaction is deemed to be an investment and such investment was permitted by credit agreement. The proposed terms and the final terms of the credit agreement can be materially different. The principal methodology used in these ratings was Consumer Packaged Goods Methodology published in February 2020. KNS Acquisition Corp. ("Nutrisystem") based in Fort Washington, Pennsylvania is a provider of weight management products and services which are sold on-line and through multi-day kits and single items available at retail locations. Customers typically purchase monthly food packages which consist of a four-week program consisting of breakfast, lunch, dinner, and snacks. Through the merger with Direct Digital, LLC "Adaptive Health", the company also markets and manufactures branded condition-specific science-based nutrition supplements which address conditions, such as men's health, joint health, and sleep management, to name a few. Adaptive Health's products are sold through DTC as well as through retail partners. LUXURY DINING: Fig & Olive Plan Approved for Creditor Vote ---------------------------------------------------------- Alex Wolf of Bloomberg Law reports that upscale restaurant chain Fig & Olive got court approval to solicit votes for its bankruptcy plan, advancing its bid to reorganize after pandemic-related business closures and employment litigation. Four restaurants in New York, Texas, and California would remain open under Fig & Olive's Chapter 11 plan, according to the company's disclosures. "I'm very happy to have a case survive Covid," Judge Sean H. Lane of the U.S. Bankruptcy Court for the Southern District of New York said at a virtual hearing Wednesday, March 31, 2021. "This is sort of the bread and butter of what reorganizations are supposed to be," he said. About Luxury Dining Group Luxury Dining Group is the owner of the Fig & Olive chain of high-end restaurants with sites in New York, Washington, D.C., and Los Angeles. Guillaume Fonkenell is the majority owner. Luxury Dining Group and 10 affiliates sought Chapter 11 protection on July 3, 2020. The first-filed case is In re F&O Scarsdale LLC (Bankr. S.D.N.Y. Lead Case No. 20-22808). The Hon. Sean H. Lane is the case judge. DAVIDOFF HUTCHER & CITRON LLP, led by Robert L. Rattet, is the Debtors' counsel. MAD RIVER: Unsecured Creditors to Recover 100% If Sold for $7.19M ----------------------------------------------------------------- Mad River Estates, LLC, filed a First Amended Combined Chapter 11 Plan of Reorganization and Disclosure Statement. The Debtor owns eight contiguous parcels of raw agricultural and recreational land consisting of approximately 563 acres along the Mad River, located at 24748 Korbel Road, Korbel, CA 95550(the "Ranch Property"). The Ranch Property value of the property between $7.1 and $8.5 million. The Ranch Property is listed for sale at $7,195,000. The Debtor intends to sell the Ranch Property by October 31, 2021, using the proceeds of sale to pay the allowed secured claims of Allstate (i.e., the Class 1B creditor); PNC (i.e., the Class 1A). If the Debtor has not filed the Sale Motion by October 31, 2021, control over the marketing and sale process will vest in the Creditors' Committee. The Creditors' Committee will be authorized to file the Sale Motion on behalf of the Estate. Allowed claims of general unsecured creditors shall be paid as follows: * Lump sum payment: Based on the current listing price of the Ranch Property of $7,195,000, general unsecured creditors are expected to receive payment of 100%of their allowed claims in one payment from the net proceeds of sale, plus interest at the prevailing federal judgment rate as of the Petition Date, which is 0.14%. * Treatment if proceeds from sale of Ranch Property are insufficient ("Pro Rata Distribution"): If the net proceeds from sale of the Ranch Property are insufficient to pay allowed claims of general unsecured creditors in full with interest, then these creditors shall receive a pro-rata share of any available proceeds. By this Plan, the Creditors' Committee is granted standing and authorized to pursue avoidance actions or claims of the estate against third parties only in the event that the net proceeds from the sale of the Ranch Property are insufficient to pay Class 2 creditors in full. All creditors are impaired and entitled to vote on confirmation of the Plan. A copy of the Amended Combined Plan and Disclosure Statement dated March 19, 2021, is available at https://bit.ly/3cDYEHF About Mad River Estates Mad River Estates, LLC, is a Korbel, Calif.-based company engaged in activities related to real estate. Mad River Estates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Cal. Case No. 20-10470) on Aug. 14, 2020. Dean Bornstein, the company's manager, signed the petition. At the time of the filing, the Debtor estimated assets of between $1 million to $10 million and liabilities of the same range. The Debtor is represented by Finestone Hayes LLP. The Office of the U.S. Trustee appointed a committee of unsecured creditors in Debtor's Chapter 11 case. The committee is represented by Buchalter, a Professional Corporation. MALLINCKRODT PLC: Seeks Court Okay for $35 Million In Exec Bonuses ------------------------------------------------------------------ Law360 reports that drugmaker Mallinckrodt PLC Wednesday asked a Delaware bankruptcy judge to allow it to pay more than $35 million in bonuses to its top executives, while creditors argued the bonuses could reward the executives who sent the company into Chapter 11. At a virtual hearing before U.S. Bankruptcy Judge John Dorsey, Mallinckrodt asked the court to allow it to pay bonuses it said will bring its executive pay in line with other companies in the pharmaceutical industry, while its unsecured creditors committee argued an investigation is needed to see how much responsibility the bonus recipients bear for the company's bankruptcy. About Mallinckdrodt PLC Mallinckrodt -- http://www.mallinckrodt.com/-- is a global business consisting of multiple wholly-owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients. As of March 27, 2020, the Company had $10.17 billion in total assets, $8.27 billion in total liabilities, and $1.89 billion in total shareholders' equity. On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates sought Chapter 11 protection in Delaware in the U.S. (Bankr. D. Del. Lead Case No. 20-12522) to seek approval of a restructuring that would reduce total debt by $1.3 billion and resolve opioid-related claims against the Company. Mallinckrodt plc disclosed $9,584,626,122 in assets and $8,647,811,427 in liabilities as of Sept. 25, 2020. Latham & Watkins LLP, Ropes & Gray LLP and Wachtell, Lipton, Rosen & Katz are serving as counsel to the Company, Guggenheim Securities, LLC is serving as investment banker and AlixPartners LLP is serving as restructuring advisor to Mallinckrodt. Hogan Lovells is serving as counsel with respect to the Acthar Gel matter. Prime Clerk LLC is the claims agent. MBM SAND: Wind Down to Be in Accordance With Company Agreement -------------------------------------------------------------- MBM Sand Company, LLC, filed a first modification to its Amended Combined Disclosure Statement and Plan of Reorganization dated February 18, 2021: The Modification adds this provision: "Notwithstanding any claim of the Debtor or its Members to enforce any obligation of a Member pertaining to an initial contribution of capital, such wind-down and dissolution will be conducted with strict compliance with Sections8.02and 8.03 of the Company Agreement, dated April 28, 2018.." The Plan, as amended, provides, that: CLASS4 – Equity Membership Holders of the Debtor The existing equity membership of the Debtor shall continue in existence following the Effective Date of this Plan. However, except for distributions to its Members for payment of federal income taxes attributable to the reorganized debtor, no Member shall receive any distribution with respect to such interest until all administrative expense claims, priority tax claims, and claims in Classes 1 through 3 are paid in full in accordance with the confirmed Plan. Upon completion of all terms of the Confirmed Plan and Confirmation Order, the Members' only further acts in regards to the Debtors' management shall be to wind-down and dissolve the Debtor in accordance with the Texas Business Organizations Code. Notwithstanding any claim of the Debtor or its Members to enforce any obligation of a Member pertaining to an initial contribution of capital, such wind-down and dissolution will be conducted with strict compliance with Sections 8.02 and 8.03 of the Company Agreement, dated April 28, 2018. Legal Counsel of the Debtor: Pendergraft & Simon, LLP William P. Haddock Leonard H. Simon William P. Haddock Allen Parkway, Suite 800 Houston, TX 77019 Tel: (713) 528-8555 Fax: (713) 868-1267 About MBM Sand Company MBM Sand Company, LLC, which is primarily engaged in a sand mining business, sought Chapter 11 protection (Bankr. S.D. Tex. Case No. 20-32883) on June 1, 2020. At the time of the filing, the Debtor disclosed assets of $1 million to $10 million and liabilities of the same range. Judge Eduardo V. Rodriguez oversees the case. The Debtor has tapped Pendergraft & Simon LLP, led by Leonard Simon, Esq., as its legal counsel. MERITAGE HOMES: Fitch Assigns BB+ Rating on Proposed Unsec. Notes ----------------------------------------------------------------- Fitch Ratings has assigned a 'BB+'/'RR4' rating to Meritage Homes Corporation's (Meritage, NYSE: MTH) proposed offering of senior unsecured notes. The notes will rank pari passu with all other senior unsecured debt issued by the company. Meritage intends to use the net proceeds from the offering to fully redeem its $300 million unsecured notes due 2022 and for general corporate purposes. Fitch currently rates Meritage's Long-Term (LT) Issuer Default Rating (IDR) and unsecured debt 'BB+'/'RR4' with a Stable Rating Outlook. Meritage's ratings reflect the company's strong credit metrics, moderate geographic and product diversity, healthy liquidity position and execution of its business model in the current housing environment. The ratings also consider Fitch's expectation for Meritage to generate less CFFO than higher-rated peers and the company's aggressive shift toward a more speculative homebuilding strategy, driven by its emphasis on the entry-level/first-time buyer, which Fitch views as a riskier approach to homebuilding. KEY RATING DRIVERS Conservative Credit Metrics: Meritage intends to maintain a net debt/capitalization ratio of 20%-30% and has managed this ratio in that range since year-end 2019 (according to Fitch calculations that consider $75 million of cash as not readily available for seasonal working capital use). The company had managed its net debt/capitalization in the 40%-45% range for much of the housing upcycle prior to deleveraging by retiring debt and building equity from 2018 to 2020. Fitch-measured net debt to capitalization was 13.1% and total debt to operating EBITDA was 1.5x as of Dec. 31, 2020, in line with or stronger than investment-grade homebuilding peers. Fitch expects the company to be able to comfortably manage its balance sheet in line with its stated targets and Fitch's rating sensitivities during the rating horizon despite its intention to aggressively rebuild and grow its community count, which will require significant land and development investment. Fitch believes that the company's capitalization ratios have sufficient cushion to support expansionary activity and absorb modest impairment charges without negative rating action. Speculative Building Activity: Meritage has significantly increased its spec building activity in order to facilitate delivery of entry-level homes on an immediate need basis in recent years. Fitch generally views high spec activity as a credit negative, all else equal, as rapidly deteriorating market conditions could result in standing inventory and consequently sharply lower margins and/or impairment charges, both of which could negatively impact credit metrics. Fitch believes the company has managed its spec building activity appropriately, as the company slowed housing starts in the early stages of the pandemic, but the strategy remains untested during a more prolonged housing downturn. Aggressive Growth Strategy: Fitch expects Meritage to significantly increase land and home inventory investment in 2021 and 2022 in order to facilitate the company's planned community expansion to 300 by mid-2022, up from 195 active communities at YE 2020. The community count expansion plans are supported by strong recent sale trends, which have led to faster than anticipated community close-outs. Fitch views the pace of growth as risky due to the uncertain macroeconomic and housing backdrop beyond 1H21, which could lead to impairment charges if the housing market were to slow meaningfully, and the significant investment this build out will require. These risks are partially offset by the company's relatively low owned land supply (2.8 years). Meritage's atypically high levels of cash and Fitch's forecast for strong EBITDA generation in 2021 will enable to the company to execute on its strategy without significantly increasing long-term debt outstanding. Limited CFFO Generation Expected: Fitch expects the company will generate negative CFFO in 2021 due to the significant inventory investment required for planned community count expansion. CFFO generation should trend positively after 2021 after active communities approach the company's target. The company generated more limited CFFO than most investment-grade peers in the last few years mostly due to the company's lower EBITDA margins. Meritage's expanding margins due to strong execution on its entry-level spec strategy could enable the company to generate similar CFFO margins to peers in the long-term. Moderate Geographic and Product Diversity: Meritage operates in 18 markets across nine states as of YE 2020, with particularly heavy exposure to Texas, Arizona, California and Florida. The company is less geographically diversified than larger investment-grade peers such as D.R. Horton (BBB+/Stable) and Lennar (BBB/Stable), which have leading market shares in dozens of markets nationwide. However, Meritage's multiregional exposure provides more diversity than lower-rated or privately-owned peers. Fitch views geographic diversity for homebuilders favorably since it may help insulate a builder from a local or regional housing downturn. The company historically focused on the trade-up market, the strongest segment during the earlier part of this upcycle. However, Meritage's focus is now solely on the entry level and first-time move up segments as it winds down remaining noncore communities. The company plans on targeting a 65%/35% split between entry-level and first move-up product, respectively. While the entry level segment remains strong at this time, Meritage's outsized exposure to this segment could adversely affect the company's operations if there is a meaningful decline in demand from this buyer segment. DERIVATION SUMMARY Meritage's credit metrics are stronger compared to M/I Homes, Inc. (BB-/Stable) and are in line with several low investment-grade rated peers. Fitch expects Meritage's net debt to capitalization ratio and total debt to operating EBITDA to be roughly in line with investment grade peers such as Pulte (BBB/Stable) and Lennar (BBB/Stable) in the intermediate term. These peers' breadth of leading positions in local markets, strong profitability and Fitch's expectation for consistently positive CFFO are credit positives relative to Meritage. M.D.C. Holdings (BBB-/Stable) has similar credit metrics, scale, profitability and cash flow characteristics as Meritage, but MDC's historically short land position, build-to-order strategy and very conservatively managed balance sheet through housing cycles are strengths relative to Meritage. KEY ASSUMPTIONS -- Total U.S. single family housing starts increase 4% in 2021; -- Fitch expects Meritage's deliveries to increase slightly in 2021 while average sales price (ASP) declines modestly, resulting in home closing revenues roughly in line with 2020; -- Moderating absorption pace in 2H 2021 and into 2022 due to difficult comparisons and Fitch's expectation for a normalizing demand environment; -- Meritage generates negative CFFO in 2021 as the company resumes more aggressive land acquisition, development and housing start activity; -- Net debt to capitalization remains below 30% and total debt/operating EBITDA situates in the 1.5x to 2.0x range during the rating horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The company consistently maintains conservative credit metrics, such as net debt to capitalization below 35% or total debt to operating EBITDA below 2.0x; -- Fitch's expectation that Meritage can generate consistently and meaningfully positive CFFO through expansionary and recessionary housing environments, consistent with many investment grade homebuilding peers, which could result from more consistent land and development spending as the company grows into a mature homebuilder; -- The company further demonstrates strong execution of its spec build strategy and community count expansion, as demonstrated by limited land impairment charges and low volatility in operating margins, with EBITDA margin percentages maintaining in the low- to mid-teens; -- Meritage improves geographic diversity through successful entry into new markets; -- Management commits to an investment grade rating. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- There is a sustained erosion of profits due to poor execution of the company's strategy, leading to consistently lower EBITDA margins and meaningful and continued loss of market share, resulting in weakened credit metrics, such as net/debt to capitalization sustaining above 40%. -- The company maintains an aggressive land and development spending program that leads to consistently negative CFFO, higher debt levels and a diminished liquidity position. BEST/WORST CASE RATING SCENARIO International scale credit 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 Solid Liquidity: At Dec. 31, 2020, Meritage had $746 million of cash and $683 million of borrowing availability under its $780 million revolver that will mature in December 2025. The company drew $500 million under its revolver in 1Q20 as a precautionary measure during the coronavirus pandemic uncertainty, which was primarily held as cash on the balance sheet and has since been repaid. Fitch believes the company has ample liquidity to manage fixed charges and land acquisition activity. The company's nearest maturity following the retirement of its April 2022 unsecured note will be in 2025, when a $400 million unsecured note comes due. SUMMARY OF FINANCIAL ADJUSTMENTS Historical and projected EBITDA is adjusted to add back non-cash stock-based compensation and interest expense included in cost of sales and also excludes impairment charges and land option abandonment costs. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. MERITAGE HOMES: Moody's Rates New $400M Unsecured Notes 'Ba1' ------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to Meritage Homes Corporation's proposed $400 million senior unsecured notes due 2029. Meritage's existing ratings, including the Ba1 Corporate Family Rating, Ba1-PD Probability of Default Rating, the Ba1 ratings on the company's unsecured notes and the stable outlook remain unchanged. The SGL-2 Speculative Grade Liquidity Rating also remains unchanged. The proceeds of Meritage's new $400 million senior unsecured notes will be used in part to repay the company's 7.0% $300 million senior unsecured notes due April 2022, which will be called simultaneously. The incremental debt proceeds will be used for general corporate purposes, which may include land spend. Pro forma for the transaction, leverage rises slightly to about 33% from 31%. However, EBIT to interest coverage will increase to approximately 10.8x from 9.4x from the retirement of the highest interest rate debt in the company's capital structure. Meritage's liquidity will also benefit from the extension of its debt maturity profile. The following rating actions were taken: Assignments: Issuer: Meritage Homes Corporation Senior Unsecured Regular Bond/Debenture, Assigned Ba1 (LGD4) RATINGS RATIONALE Meritage's Ba1 Corporate Family Rating reflects the company's: 1) strong market position within the entry-level and first move-up homebuyer categories, including through its LiVE.NOW homes; 2) product strategy focus that is expected to benefit from the demand of millennial and baby boomer population cohorts in the next several years; 3) geographic diversity and good market positions within its individual regional markets; and 4) governance factors including prudent balance sheet management with a demonstrated conservative approach to debt leverage, which is expected to be maintained. At the same time, the company's credit profile is constrained by: 1) exposure to gross margin pressure from increasing costs of land, labor and building materials; 2) Moody's expectation that the company will operate with a high proportion of speculative homes in production; 3) an owned land supply of approximately 59% of total (representing 2.8 years from 4.7 years of total supply at December 31, 2020), subjecting the company to a risk of impairment charges during a weak market environment; 4) Moody's expectation of negative cash flow from operations in 2021 given investments in growth; and 5) the cyclicality of the homebuilding industry and exposure to protracted declines. The stable outlook reflects Moody's expectation that Meritage will operate conservatively, maintain a good liquidity profile, and benefit from favorable conditions in the homebuilding sector, including a constrained supply of homes and low interest rates. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade include: -- Stability of economic and homebuilding industry conditions -- Significant increase in size, scale, and geographic diversification -- Maintenance of strong credit metrics, including homebuilding debt to book capitalization below 35% and EBIT interest coverage in the high single digits, on a sustained basis. -- Maintenance of a very good liquidity position, including strong free cash flow -- Conservative financial policies and a demonstrated commitment to attaining and maintaining an investment grade rating, both to Moody's and to the debt capital markets. Factors that could lead to a downgrade include: -- The company begins generating net losses, recognizes major impairment charges, experiences meaningful gross margin compression, or sees liquidity weaken -- Debt leverage approaching 45% or interest coverage weakening below 5.0x -- Aggressive financial policies with respect to shareholder friendly actions or land investments The principal methodology used in these ratings was Homebuilding And Property Development Industry published in January 2018. Meritage Homes Corporation, founded in 1985 and headquartered in Scottsdale, Arizona, is the seventh largest rated US homebuilder based on LTM revenues. The company primarily builds single-family detached and, to a lesser extent, attached homes. Meritage operates in three regions (West, Central, East), covering 18 markets in Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee. Product offerings include largely entry-level and first move-up homes, and to a lesser degree active adult and luxury homes. In 2020, the company generated revenues and net income of approximately $4.5 billion and $423 million, respectively. METHANEX CORP: Fitch Affirms 'BB' LongTerm Issuer Default Rating ---------------------------------------------------------------- Fitch Ratings has affirmed Methanex Corporation's Long-Term Issuer Default Rating (IDR) at 'BB' and affirmed all associated unsecured debt at 'BB'/ 'RR4'. The Rating Outlook is Negative. The 'BB' rating reflects the company's position as the largest global supplier of methanol, with a global distribution network and 9.2 million metric tons (MT) in production capacity. The ratings also reflect the company's portfolio high grading, good historical financial performance, and solid historical FCF and leverage metrics. Offsetting considerations include methanol's sensitivity to crude and natural gas prices and China's demand, particularly at methanol-to-olefins (MTO) facilities, and the significant expense associated with maintaining shipping and storage facilities. The negative outlook reflects the pressured but improving demand environment, elevated leverage profile, and financial risk related to the company's Geismar 3 (G3) project. Expectations of continued financial discipline alongside an improved demand environment could result in a stabilization of the outlook. KEY RATING DRIVERS Elevated Leverage Profile: Fitch believes that Methanex has the funding to complete the cost-advantaged G3 expansion, with $927 million in combined availability under its delayed drawn term loan and revolver as of 4Q20. Fitch anticipates that the company may use these facilities to fund the G3 project. The company has articulated a desire to find a strategic partner to help fund the expansion, which would alleviate some of the need for debt funding. In the event Methanex resumes G3 spending, Fitch forecasts funds from operations (FFO) leverage trending towards 3.5x. The decision not to resume G3 spending would likely be a result of a sustained trough in methanol demand, which could result in lower EBITDA levels and a similar leverage profile to Fitch's Base Case despite the lack of additional debt funding. Uncertain But Improving Pricing: Average realized price for Methanex fell to $256/ton in 4Q19 and then to $211/ton in 2Q20. This period represented the bottoming out of pricing and utilization rates, with average realized price of $247/ton on the year, and Fitch believes that realized prices will exceed $300/ton in the near to medium term. Although 2020 demonstrated the relatively higher cash flow risk for methanol producers like Methanex relative to investment-grade chemical peers, Fitch notes that a favorable pricing environment for ethylene and polyethylene and an ongoing recovery in economic activity and fuel demand are positive indicators for methanol prices and volumes. FCF Generation to Rebound: Methanex's position as a low cost producer has allowed it to achieve generally favorable cash generation, with cash outlays often directed toward capital expenditures and a steady dividend. Pressured FCF generation followed the large decline in methanol prices, and Methanex proactively cut dividends and delayed capital spending, including Geismar 3 (G3), to bolster liquidity. The company will likely resume G3 spending if it determines that methanol demand can support the execution risk and liquidity requirements associated with completing the project. Potential G3 Project Spending: Methanex's $1.3 billion-$1.4 billion, 1.8 million MT Geismar 3 (G3) expansion creates short-term risks and longer-term opportunities for the credit. At an estimated $775/MT and with roughly $1.0 billion in spending remaining, the Brownfield G3 project has a number of cost advantages, including shared storage and terminal facilities; lack of need to build a reformer given the ability to use purge gas; procurement synergies, and amortization of other fixed costs over a larger production base. Medium-term credit risks in the event that full project spending is resumed include cost overruns and delays. Fitch notes that the capacity increase associated with the project may serve as a deterrent to the company's competitors who may be considering bringing additional capacity online as methanol prices recover. Energy Applications Drive Price: Methanol prices are volatile, and correlated to oil prices, while methanol's feedstock costs are linked to natural gas and coal prices in Asia. As a result, sharp declines in the oil/gas price ratio can periodically pressure the credit. Methanol demand is increasingly driven by methanol for energy applications, which prior to the downturn had been the fastest growing component of demand and included MTO plants, gasoline blendstocks to increase octane (MTBE), a substitute for bunker and vehicle fuel, and an industrial boiler fuel. Energy applications for methanol are sensitive to demand in China, particularly MTO, which could cap methanol prices. Low Cost Producer: Methanex is the largest global supplier of methanol, with 9.2 million MT in current production capacity, and sales of 10.7 million MT or about 13% of the methanol market. Natural gas is the main feedstock and is its single largest expense. Methanex's portfolio benefits from low cost/stranded gas. The company's plants outside North America have credit-friendly contract structures, which include a low initial fixed gas price, plus a variable component that is shared between Methanex and the gas supplier as methanol prices rise. This structure is countercyclical insofar as it lowers the company's costs in a down-cycle in exchange for surrendering some methanol price-related gains on the upside. Methanex's North American plants (Geismar 1 & 2, and Medicine Hat, Canada) lack these features but benefit from low gas prices linked to the shale revolution. DERIVATION SUMMARY Relative to the IG chemical companies, Methanex has exhibited relatively higher cash flow volatility. The company's single product focus on methanol means it is less diversified than integrated chemical producers such as Eastman Chemical Company (BBB-/Stable) and Westlake Chemical (BBB/Negative), and more in line with certain U.S. Oil and Natural Gas producers like CNX Resources Corporation (BB/Positive). YE 2020 Total Debt with Equity Credit/Operating EBITDA for Methanex was 6.9x, which compares unfavorably to Eastman and Westlake, each at 3.0x. Fitch anticipates Methanex's leverage to decline from its peak in 2020. However, this is offset by the company's strong position as the world's largest supplier of methanol, its portfolio of geographically diversified, low-cost plants and an increasingly supportive pricing environment. MEOH's margins are in line with IG chemical peers but more cyclical given methanol's linkage to crude and coal pricing, and sensitivity to China's demand for methanol in energy applications. KEY ASSUMPTIONS -- Methanol prices recover sharply through 2022 due to increased fuel and MTO demand, as well as general economic recovery; -- G3 expansion resumes in 2021, completed in 2023 - no strategic partner considered for G3; -- Delayed draw term loan (DDTL) drawn to fund G3; -- Share repurchases resume and dividends restored to pre pandemic levels by 2024. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- FFO Leverage durably below 3.25x, potentially due to finding a beneficial strategic partner to help fund the G3 expansion alongside a faster-than-anticipated recovery in and favorable outlook for methanol prices; -- Increased product diversification. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO Leverage durably above 3.75x, potentially due to a sustained trough in methanol prices and a lower demand for MTO production; -- Cost overruns, delays, or realization of other execution risk related to G3 expansion leading to stepped up borrowings; -- Sustained disruption in operations of major facilities. BEST/WORST CASE RATING SCENARIO International scale credit 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 YE 2020, Methanex had $834 million in readily available cash and $927 million in availability between its revolver and its delayed draw term loan. The company faces a challenging mismatch in cash flows versus planned capital expenditures, with an improving methanol pricing environment coinciding with around $1.0 billion in remaining capital spending related to the G3 expansion. Fitch expects the company will partially draw on its delayed draw term loan to fund the expansion, which will drag on its credit metrics. Liquidity will remain sufficient, with the company maintaining full availability on its $300 million revolver. Mitigating these challenges is a relative lack of near-term maturities, with a $300 million bond maturity in 2024. Should the company draw on its delayed draw term loan, it would face a modest maturity wall in 2024, consisting of $300 million in unsecured bonds plus the DDTL maturity. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. MICHAELS COMPANIES: Moody's Assigns B1 CFR on Proposed Financing ---------------------------------------------------------------- Moody's Investors Service assigned ratings to The Michaels Companies, Inc. (New) following the announcement of the proposed financing of its purchase by Apollo Global Management Inc., including a B1 corporate family rating, B1-PD probability of default rating, a Ba3 rating on both its proposed senior secured credit facility and its senior secured notes and a B3 rating on its proposed senior unsecured notes. Its proposed senior secured credit facility and senior secured notes will be secured by a first-priority lien on all assets and a second priority lien on collateral securing its ABL (unrated), largely its inventory. The ratings outlook is stable. The assignments reflect governance considerations particularly Michaels' private equity ownership upon closing of the proposed transaction with Apollo. Net proceeds from the proposed offerings along with approximately $1.4 billion of new equity from Apollo will be used to fund the equity purchase of $3.3 billion and refinance all existing debt. The ratings at Michaels Stores, Inc. will be withdrawn upon closing of the transaction and repayment of its existing debt instruments. Moody's estimates pro-forma debt/EBITDA of 5.1x for the fiscal year ending January 30, 2021 based on the closing of the proposed transaction. Michaels is expected to have good liquidity evidenced by its proposed $1 billion ABL which is expected to be undrawn at closing and expected free cash flow generation based on normalized working capital as the company reinvests to replenish inventory. Assignments: Issuer: Michaels Companies, Inc. (The) (NEW) Probability of Default Rating, Assigned B1-PD Corporate Family Rating, Assigned B1 Senior Secured Term Loan, Assigned Ba3 (LGD3) Senior Secured Regular Bond/Debenture, Assigned Ba3 (LGD3) Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD5) Outlook Actions: Issuer: Michaels Companies, Inc. (The) (NEW) Outlook, Assigned Stable RATINGS RATIONALE The Michaels Companies, Inc. (New)'s B1 CFR is supported by the company's scale and strong market position (in terms of number of stores) as the established leader in the highly fragmented arts and craft segment of retail. Michaels had a track record of relatively stable revenues and margins prior to the pandemic that averaged around the mid-teens over the past five years. The company has experienced strong demand after reopening post lockdowns as consumers remain focused on activities around the home. In addition, Michaels has a history of successfully managing high leverage and of repaying debt. Michaels rating is constrained by its private equity ownership, which could result in more aggressive financial strategies being pursued. Michaels also has modest business risk associated with the highly seasonal nature of its product sales, exposure to categories that are more sensitive to economic conditions (such as seasonal décor and custom framing), and competition from two other arts and craft chains and big box retailers. The stable outlook reflects Moody's expectation that consumer spending patterns will begin to normalize over the next 12-18 months resulting in a migration of spending away from home based activities back to travel and leisure. The stable outlook reflects that despite this pressure, Michaels will maintain good liquidity, financial strategies that support debt reduction resulting in lower leverage over near term and credit metrics indicative of the B1 rating. The Ba3 ratings on Michaels' secured term loan and notes are one notch higher than the B1 corporate family rating reflecting their security interest in certain assets of the company and the significant level of junior capital in Michaels' capital structure. The secured term loan rating also takes into consideration the relatively stronger position of the unrated $1 billion asset based revolver, which has a first lien over the company's most liquid assets including inventory. The B3 rating for Michaels Stores' senior unsecured notes reflects their junior ranking in the company's overall capital structure. The proposed term loan does not contain financial maintenance covenants. In addition, it contains incremental facility capacity up to the greater of 1.00x proforma EBITDA (as bank defined) and $820 million, plus voluntary prepayments, and unlimited amounts subject to (outside the closing date) 0.25x additional first lien net leverage for pari debt, 0.50x above the first lien incurrence ratio for junior debt, or either 0.50x additional total net leverage or a 2.00x Fixed Charge Coverage Ratio for unsecured debt, with exclusions for acquisitions. The credit agreement permits the transfer of assets to unrestricted subsidiaries, to the extent permitted under the carve-outs, with no "blocker" provisions restricting such transfers. The company has limitations on restricted payments which include amounts not exceeding the greater of 0.30x of EBITDA on a pro forma basis for the most recently ended four fiscal quarter period and $250 million. Any additional restricted payments can be made so long as the net total leverage ratio on a pro forma basis is not greater than the ratio that is equal to 0.75x below the Net Total Leverage Ratio on the closing date. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Rating could be upgraded to the extent the company continues to post consistent sales and operating earnings growth while maintaining good liquidity. An upgrade would require financial strategies which supported stronger credit metrics and a significant reduction in its financial sponsor ownership. Quantitatively, an upgrade would require EBIT/interest to be above 2.75x and leverage sustained below 4.0x. Ratings could be downgraded if liquidity deteriorates for any reason or financial strategies become more aggressive. Quantitatively, ratings would be downgraded should EBIT/interest be sustained below 2.25x or leverage remained above 4.75x. The Michaels Companies, Inc. (NEW), the largest dedicated arts and crafts specialty retailer in North America based on number of stores operated. The company operates more than 1,252 stores in 49 states and Canada and generated revenues of approximately $5.3 billion for the latest twelve months ended January 30, 2021. The company primarily sells general and children's crafts, home décor and seasonal items, framing and scrapbooking products. Michaels Companies, Inc., (ticker "MIK"), is currently publicly traded. The board has approved to be taken private by Apollo Global Management Inc. in a transaction valued at approximately $5.5 billion. The principal methodology used in these ratings was Retail Industry published in May 2018. MUSCLEPHARM CORP: Swings to $3.2 Million Net Income in 2020 ----------------------------------------------------------- MusclePharm Corporation filed with the Securities and Exchange Commission its Annual Report on Form 10-K disclosing net income of $3.18 million on $64.44 million of net revenue for the year ended Dec. 31, 2020, compared to a net loss of $18.93 million on $79.66 million of net revenue for the year ended Dec. 31, 2019. As of Dec. 31, 2020, the Company had $13 million in total assets, $37.42 million in total liabilities, and a total stockholders' deficit of $24.42 million. Los Angeles, California-based SingerLewak LLP issued a "going concern" qualification in its report dated March 29, 2021, citing that the Company has suffered recurring losses from operations, has an accumulated deficit and its total liabilities exceed its total assets. This raises 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://www.sec.gov/Archives/edgar/data/1415684/000149315221007088/form10-k.htm About MusclePharm Headquartered in Denver, Colorado, MusclePharm Corporation (OTCQB:MSLP) -- http://www.musclepharm.comand http://www.musclepharmcorp.com-- is a lifestyle company that develops, manufactures, markets and distributes branded nutritional supplements. The Company offers a broad range of performance powders, capsules, tablets, gels and on-the-go ready to eat snacks that satisfy the needs of enthusiasts and professionals alike. NATIONAL RIFLE ASSOCIATION: Secret Board Meeting Can be Raised -------------------------------------------------------------- Law360 reports that the National Rifle Association's assertion that information about a closed board meeting of the bankrupt organization is privileged can be challenged during a Chapter 11 dismissal trial in the second week of April 2021 after a Texas bankruptcy judge said Wednesday, March 31, 2021, that he would make case-by-case rulings on individual questions involving the meeting. During a virtual hearing, U.S. Bankruptcy Judge Harlin D. Hale denied motions from the New York attorney general and former NRA media consulting firm Ackerman McQueen challenging the debtor's withholding of testimony from its directors about a January 2021 executive session where the authority to file for bankruptcy was allegedly delegated to executive vice president. About National Rifle Association Founded in 1871 in New York, the National Rifle Association of America is a gun rights advocacy group. The NRA claims to be the longest-standing civil rights organization and has more than five million members. Seeking to move its domicile and principal place of business to Texas amid lawsuits in New York, National Rifle Association of America sought Chapter 11 protection (Bankr. N.D. Tex. Case No. 21-30085) on Jan. 15, 2021. Affiliate Sea Girt LLC simultaneously sought Chapter 11 protection (Case No. 21-30080). The NRA was estimated to have assets and liabilities of $100 million to $500 million as of the bankruptcy filing. Judge Harlin Dewayne Hale oversees the cases. The Debtors tapped Neligan LLP and Garman Turner Gordon LLP as their bankruptcy counsel, and Brewer, Attorneys & Counselors as their special counsel. The U.S. Trustee for Region 6 appointed an official committee of unsecured creditors on Feb. 4, 2021. Norton Rose Fulbright US, LLP and AlixPartners, LLP serve as the committee's legal counsel and financial advisor, respectively. NEUROCARE CENTER: Unsecured Creditors Will Receive $194K in Plan ---------------------------------------------------------------- Neurocare Center, Inc., submitted a First Amended Plan of Reorganization. The Plan provides for, among other things: (a) the cancellation of certain indebtedness in exchange for cash or other property of the Debtor and (b) the assumption or rejection of executory contracts and unexpired leases to which the Debtor is a party. The Debtor will restructure its finances by committing its disposable income to Plan payments. Each holder of a Class C Allowed Claim on account of a General Unsecured Claim shall receive its Pro Rata share of Distributable Cash from the Debtor. The payment by the Debtor to holders of Class C Allowed Claims shall be made in annual payments for up to 5 years beginning in the first year following the Effective Date, but in no event, commencing no later than Sept. 30, 2021. Total payments of Distributable Cash shall be $194,426. The funds for such distributions and funds for distributions to holders of Class C Allowed Claims will come from the proceeds of the Debtor's ordinary income and proceeds of Avoidance Actions and other actions, if any. The Debtor believes, and the liquidation analysis demonstrates, that a chapter 7 liquidation of the Debtor's assets would result in no recovery to holders of Class C Allowed Claims. Under the Plan, the holders of Allowed Interests in Class D shall retain their Allowed Interests in the Debtor. The Debtor will continue to be managed by its current owners: Dr. Stalker, Dr. Nafzinger, Dr. Zollinger, Dr. Drake, and Dr. Earl. There will be no change in the Debtor's management or ownership structure as a result of confirmation of this Plan. A copy of the First Amended Plan Of Reorganization is available at https://bit.ly/3fAdqBr from PacerMonitor.com. About Neurocare Center Founded in 1995, Neurocare Center Inc. -- http://www.neurocarecenter.com/-- provides health care services to patients with neurological, rehabilitative and sleep disorders. At the present time, it is the only neurology practice in Stark County, Ohio, providing outpatient services and inpatient services to Mercy Medical Center and Aultman Hospital. Neurocare Center filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ohio Case No. 21-60030) on Jan. 12, 2021. Neurocare Center President Andrew Stalker MD signed the petition. At the time of filing, the Debtor disclosed $597,245 in assets and $2,128,274 in liabilities. Judge Russ Kendig oversees the case. Anthony J. DeGirolamo, Attorney at Law serves as the Debtor's legal counsel. NINE ENERGY: Moody's Lowers CFR to Caa3 on Restructuring Risks -------------------------------------------------------------- Moody's Investors Service downgraded Nine Energy Service, Inc.'s Corporate Family Rating to Caa3 from Caa1, Probability of Default Rating to Caa3-PD from Caa1-PD and senior unsecured notes rating to Caa3 from Caa2. Moody's downgraded Nine's Speculative Grade Liquidity rating to SGL-3 from SGL-2. The outlook remains negative. "The downgrade of Nine Energy's ratings reflect higher debt refinancing and restructuring risks as debt maturities continue to approach amid a very challenging operating environment," said Jonathan Teitel, a Moody's analyst. Downgrades: Issuer: Nine Energy Service, Inc. Probability of Default Rating, Downgraded to Caa3-PD from Caa1-PD Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Corporate Family Rating, Downgraded to Caa3 from Caa1 Senior Unsecured Notes, Downgraded to Caa3 (LGD4) from Caa2 (LGD4) Outlook Actions: Issuer: Nine Energy Service, Inc. Outlook, Remains Negative RATINGS RATIONALE Nine's Caa3 CFR reflects Moody's view that the company has an untenable capital structure. During 2020, Nine generated negative EBITDA and Moody's expects minimal EBITDA in 2021 while the oilfield services sector remains highly competitive amid continued capital discipline by upstream companies. Consequently, Moody's expects very high leverage and weak interest coverage at the end of 2021. The lower level of upstream capital spending (though improved from mid-2020 levels) impedes Nine's ability to significantly improve its credit metrics. While upstream capital spending and related completion activity is likely to improve in 2022, the pace of recovery looks to be slow. There are rising risks of restructuring as debt maturities approach. The company has small scale and intense competition in a difficult operating environment. In 2020, to contend with lower customer demand, Nine reduced expenses by decreasing labor costs and lowering capital spending. Nine's SGL-3 rating reflects Moody's expectation that the company will maintain adequate liquidity into early 2022. Moody's expects negative free cash flow will reduce cash on the balance sheet ($69 million as of December 31, 2020). Nine's ABL revolver is undrawn and as of December 31, 2020, Nine had $38 million available under the facility ($0.5 million in letters of credit were outstanding). Nine's $347 million of senior unsecured notes due 2023 (amount outstanding as of December 31, 2020) are rated Caa3, the same as the CFR because of the relatively small borrowing base of the ABL revolver to which the notes are effectively subordinated. The negative outlook reflects Moody's expectation that Nine's leverage will remain high, its cash balance will decline over time, and restructuring risks increase as debt maturities approach. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to a downgrade include increasing default risk or Moody's lowering its view on expected recoveries. Factors that could lead to an upgrade include a stronger than expected increase in revenues and profitability, sufficient debt reduction to achieve a tenable capital structure and improving liquidity. Nine, headquartered in Houston, Texas, is a publicly traded provider of oilfield services to exploration and production companies and primarily focused on onshore well completions. Revenue for 2020 was $311 million. The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. NTH SOLUTIONS: Seeks Cash Collateral Access ------------------------------------------- Nth Solutions, LLC asks the U.S. Bankruptcy Court for the Eastern District of Pennsylvania for authority to, among other things, use cash collateral and pay post-petition payroll. The Debtor requires the use of cash collateral for immediate expenditures and operating expenses. The Debtor is in the process of preparing a projection of their expected revenue from operations and operating costs. The Budget will be submitted prior to the hearing on the Motion. The Debtor's next payroll comes due April 2, 2021. An abrupt cessation of the Debtor's business would cause extreme hardship to the Debtor's clients, its creditors, and its employees. The Debtor says it must maintain its relationship with its employees so that the essential services they provide are uninterrupted. If the present employees terminate their employment, the Debtor will be forced to hire new, untrained "hard-to-find" replacements. As a result, clients will receive less than satisfactory service. The Debtor will suffer negative publicity and its relationship with its clients and creditors could also be jeopardized. The Debtor's bankruptcy filing is the result of a significant amount of debt, the pressure of certain creditors to get paid, and the initial and subsequent lockdowns ordered by the Governor of Pennsylvania due to the Covid-19 health crisis. As of the Petition Date, the Debtor's secured debt consists of certain obligations owed to Bryn Mawr Trust. Prior to the filing of the Voluntary Petition, the Debtor entered into a secured loan agreement with the Lender in the original principal amount of $ 175,000. Pursuant to the terms of the Agreement, in order to secure the Debtor's obligations, the Debtor granted to the Lender, among other things, a security interest in all of the Debtor's assets. As of the Petition Date, the principal balance due under the Agreement is approximately $130,194. The Debtor's primary assets are cash, accounts receivable, machinery, equipment and general intangibles. The Debtor will attempt to negotiate with the Lender to reach a consensual agreement on the Debtor's use of cash collateral and the adequate protection to be afforded to the Lender after the Petition Date. In the event no agreement is reached by the hearing date, the Debtor is requesting that the Court authorize the use of cash collateral. However, the Debtor has spoken to a representative of the Lender who has indicated that the Lender would consent to the use of cash collateral. The Debtor also requests the court to schedule an expedited hearing on the motion at its earliest convenience. A copy of the Motion is available for free at https://bit.ly/39OACIv from PacerMonitor.com. About Nth Solutions, LLC Nth Solutions, LLC -- https://nth-solutions.com/ -- operates a facility located at 15 East Uwchlan Avenue in Exton, Pennsylvania, where it manufactures electronic and mechanical precision devices. In addition to its own product line, it also works with its clients using a proprietary market-driven methodology in order to produce additional "state-of-the-art" products. Nth Solutions sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. E.D. Penn. Case No. 21-10782) on March 26, 2021. In the petition signed by Susan Springsteen, managing partner, member, the Debtor disclosed up to $50,000 in assets and up to $10 million in liabilities. MASCHMEYER MARINAS P.C. represents the Debtor as counsel. OLMA-XXI INC: Court Approves Disclosure Statement ------------------------------------------------- Judge Nancy Hershey Lord has entered an order approving the Disclosure Statement of Olma-XXI, Inc. A telephonic (NHL) hearing will be held on May 4, 2021, at 2:30 p.m. (NHL) for confirmation of the Plan before the Honorable Nancy H. Lord, United States Bankruptcy Judge, United States Bankruptcy Court for the Eastern District of New York (NHL). April 26, 2021 (NHL), is fixed as the last day for filing and serving written objections to confirmation of the Plan. All ballots voting in favor of or against the Plan are to be submitted so as to be actually received by counsel for the Debtor on or before April 26, 2021 (NHL) at 4:00 p.m. Objections to confirmation of the Plan must be filed and served by April 26, 2021 (NHL), at 4:00 p.m. Counsel for the Debtor will file a ballot tally and an affidavit and/or brief in support of confirmation April 27, 2021 (NHL) at 12:00 p.m. About Olma XXI Inc. Located in Brooklyn, New York, Olma-XXI, Inc., distributes ethnic and specialty foods. Olma-XXI, Inc., is a major producer of fine caviar, meat, fish, and other quality foods. Olma-XXI filed a Chapter 11 petition (Bankr. E.D.N.Y. Case No. 19-44731) on Aug. 1, 2019. In the petition signed by Valeri Eliachov, president, the Debtor disclosed $246,471 in assets and $1,965,500 in liabilities. The Hon. Nancy Hershey Lord oversees the case. Alla Kachan, Esq., at the Law Offices of Alla Kachan, P.C., serves as bankruptcy counsel to the Debtor. PARKLAND CORP: Fitch Assigns BB Rating on Proposed USD Unsec. Notes ------------------------------------------------------------------- Fitch Ratings has assigned a 'BB'/'RR4' rating to Parkland Corporation's proposed issuance of U.S. dollar-denominated senior unsecured notes. Proceeds will be used to refinance senior unsecured notes maturing in 2025 and 2026 and to reduce outstanding credit facility borrowings. Parkland's ratings and Stable Outlook reflect its unique business characteristics as a fully integrated downstream petroleum company. It features a strong retail fuel presence in Canada and the Caribbean and a growing presence in the U.S. as well as supporting distribution and logistics businesses and small relative refining operations. Fitch views the long-term cash flow stability gained through Parkland's integrated operations and diversified asset base as supportive of credit quality. The company has grown significantly in recent years through acquisitions and steady capital spending on organic initiatives. However, risks remain as the lasting impact of measures taken to control the spread of the coronavirus continue to unfold in the marketplace. KEY RATING DRIVERS Resilient 2020: Volumes declined rapidly across Parkland's businesses during the first half of 2020 in response to stay-at-home orders to combat the coronavirus. Parkland experienced temporary large YOY product volume decreases in the first few months of the pandemic, but full-year 2020 volumes decreased only 12% in Canada and 3% in International from 2019 levels, both better than Fitch expected. Higher than anticipated margins in Canada and the U.S. led to better EBITDA and leverage than previous Fitch targets. Fitch forecasts a continued return to a sustainable operating environment, including a return to driving patterns near pre-coronavirus levels over the next 12 to 24 months. Capturing Margin Along the Value Chain: Parkland has a strong and established retail footprint in Canada and the Caribbean and a small but growing presence in the U.S. The company drives value through the system by creating and exploiting cost/supply advantages. These advantages come via downstream integration, allowing Parkland to secure attractive margins in support of consistent cash flow generation. The downstream integration advantages are meaningful versus nonintegrated fuel retailer peers. Parkland's diversified business model and vertical integration also help smooth some of the volatility common in the refining space. Parkland's own retail outlet for finished product sourced both internally and externally, and its capability to move, store and deliver that product to customers provides the company with an offset and a simple buffer to the cyclical lows inherent in the refining industry. Diverse Portfolio: Parkland has approximately 1,850 company and dealer-owned retail sites across Canada, and nearly 500 in both the Caribbean and the U.S. Parkland's retail and commercial franchises display size/scale advantages and geographic/product diversification. Parkland has regionally relevant brands in close proximity to the major population centers. The company reports that roughly 85% of Canadians live within a 15-minute drive of a Parkland service station. Parkland has a dominant position in many of the Caribbean countries where it operates, meaningful shipping capabilities, and control of essential distribution and supply assets. Its size/scale in the U.S. is small, but the company has been expanding its retail, commercial and wholesale capabilities via advantages developed just north of the border. The juxtapositions within Parkland's refining operations in Burnaby, British Columbia (BC), as they relate to size, scale and asset quality are distinct. Currently, the company operates only a single, small capacity, low complexity refinery. Fitch typically views refining companies with less than 100,000 barrels per day of capacity as well as single-asset refineries as being more consistent with a 'B' credit profile, if it were a standalone refining business. Fitch believes Parkland's single refinery possesses some geographic advantages. It is strategically connected by pipeline to the Trans Mountain Pipeline, and its tank farm in Burnaby is located on the Burrard inlet, in close proximity to Vancouver, BC. Additionally, the Burnaby refinery is fully integrated with Parkland's commercial/wholesale and retail businesses in Western Canada and is not a merchant refiner. These unique characteristics provide more cash flow and earnings stability than Parkland would have without integration, in Fitch's view. Growth Supported by M&A: Parkland has grown over the past few years, 2020 aside, largely on the back of successful acquisitions, with synergy capture after the fact and steady organic growth all along the way. With the 2017 Ultramar (CAD978 million) and Chevron Canada (CAD1.68 billion) acquisitions, Parkland generated an approximate 50% synergy capture, defined by the company as EBITDA lift post-acquisition. In early 2019, the company moved into the Caribbean with the purchase of 75% of Sol Investments for CAD1.5 billion and obtained a dominant fuel marketing position in 23 countries with extensive supply and distribution assets. The company spent nearly CAD600 million on acquisitions in the U.S. since the beginning of 2018 through the end of 2020, expanding into three regional operating centers: Northern Tier, Rockies and Southeast. Additionally, in February 2021 Parkland announced an acquisition that would add a fourth regional operating center in the Pacific Northwest. The company has successfully acquired attractive assets and captured significant synergies post-transactions, supporting Fitch's assumptions for improving leverage beyond 2020. Refining Cycle: Refining is subject to periods of boom and bust, with sharp swings in crack spreads over the cycle. Given the rest of Parkland's portfolio is highly ratable, refining remains a source of potential variability in future results. Retail, commercial and wholesale fuel and logistics operating segments tend to be less cyclical, and Fitch expects Parkland's positions in Canada and the Caribbean to benefit from its position as one of the largest competitors in those regions. DERIVATION SUMMARY Parkland is somewhat unique relative to Fitch's coverage given its diversification across the midstream and downstream value chain, especially due to the relatively small size and scale of its refining operations. From a business line perspective, though orders of magnitude smaller in size and scale, Fitch sees Marathon Petroleum Corporation (MPC; BBB/Negative) as a peer. Fitch views a one full rating category difference between Parkland and MPC as appropriate given Parkland's distinctive characteristics, significantly smaller size and scale, and weaker relative financial profile. Credit rating differences, relative to MPC, arise from Parkland's 'single refiner risk' factor and the substantially smaller size, scale and complexity of Parkland's refining operations. Fitch views similarly rated Sunoco LP (SUN; BB/Positive) as a peer for the distribution segment of Parkland's business. Differences in credit profile, relative to SUN, arise from Parkland's position as a fully integrated downstream operator. However, Fitch views SUN as having greater margin stability, supported by its multi-year take-or-pay fuel supply agreement with a 7-Eleven subsidiary, under which SUN will supply approximately 2.2 billion gallons of fuel annually, and no refining operations. Puma Energy Holdings Pte Ltd (BB-/RWN) is a global integrated midstream and downstream peer with storage, distribution, fuel-retailing and business to business activities across the globe. Relative to Parkland, Puma has a slightly larger size and scale, leverage that is similar but more exposure to developing economies and foreign currency risks globally, leading to its lower credit rating. Leverage, as measured by total adjusted debt/operating EBITDAR, is roughly one half to one full turn worse than MPC, 2020 excluded, and Fitch does not forecast improvement in this metric for Parkland until later in the forecast period. Fitch expects Parkland's leverage to be at least one turn better than Sunoco's over the forecast period, 2020 excluded, based on Fitch's expectations for SUN's total debt with equity credit/operating EBITDA to end 2021 between 4.0x-4.3x. Parkland's weaker relative financial profile is a factor considered in the credit rating difference between MPC and Parkland. KEY ASSUMPTIONS -- Full-year 2021 volumes, both retail and commercial, rebound meaningfully in Canada, leading to approx. 20% growth compared to 2020. Margins in Canada move towards historical averages; -- The USA segment experiences a similar level of YOY volume growth in 2021, relative to Canada, driven in large part by acquisitions, both announced and assumed; -- Given the strong 2020 volume performance in the International segment, compared to the Canadian segment, 2021 growth assumptions are more muted. Margins remain similar to recent history; -- Utilization at the company's Burnaby refinery of roughly 85% in 2021, after posting a turnaround impacted 68.9% utilization in 2020. Refining utilization of 90%-94% in years without a major turnaround, beyond 2021; -- An increase in near-term growth and acquisition spending, from the trough seen in 2020, including maintenance and growth capital expenditures in line with management guidance; -- Minimal debt issuances/repayments over the forecast period, beyond the currently proposed transaction; -- USD1.00/CAD1.33 throughout the quarters of the forecast period. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Expected or actual fiscal year with total adjusted debt/operating EBITDAR below 3.0x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Total adjusted debt/operating EBITDAR, capitalizing operating lease expense at 8.0x, above 4.0x on a sustained basis. Attractive acquisitions that push this metric above the negative sensitivity temporarily will be reviewed on a case by case basis; -- A second wave of stay-at-home orders across North America related to the coronavirus, leading to further demand destruction, without an offsetting increase in fuel margins; -- A disproportionate decrease in realized fuel margins versus increased fuel volumes; -- Impairments to liquidity; -- Acquisitions that increase overall business risk and/or are not financed in a balanced manner. BEST/WORST CASE RATING SCENARIO International scale credit 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 Liquidity Adequate: Parkland had total available liquidity of roughly CAD1.3 billion, including CAD262 million in unrestricted cash and equivalents on the balance sheet as of Dec. 31, 2020. On March 25, 2021 the company amended its senior secured credit facility agreement to increase the total amount available and extend the maturity date. The two-tranche credit facility now has approximately CAD1.9 billion in total availability, up from approximately CAD1.7 billion. Both credit facilities mature in 2026. The company had just under CAD700 million drawn on its revolving credit facilities as of Dec. 31, 2020. Along with additional cash generated from operations, Parkland's liquidity position improved significantly since the end of first-quarter 2020. With proceeds from the proposed issuance of senior unsecured notes being used to refinance 2025 and 2026 maturities, Parkland will have no senior unsecured notes due until 2027. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch applies an 8.0x multiple to operating leases. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. PEARL HOLDING III: Moody's Withdraws 'Caa1' Corp Family Rating -------------------------------------------------------------- Moody's Investors Service has withdrawn the Caa1 corporate family rating and senior secured bond rating of Pearl Holding III Limited, as well as the negative outlook. RATINGS RATIONALE Moody's has decided to withdraw the ratings because of inadequate information to monitor the ratings, due to the issuer's decision to cease participation in the rating process. COMPANY PROFILE Pearl Holding III Limited (Pearl III) is a precision engineered plastic components producer, mainly engaged in the manufacture and sale of plastic injection molds and related products. It is an indirectly wholly owned subsidiary of Platinum Equity, LLC, a private equity firm, headquartered in Los Angeles. PEELED INC: Seeks to Hire Newpoint as Restructuring Advisor ----------------------------------------------------------- Peeled, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Delaware to employ Newpoint Advisors Corporation as restructuring advisor. The firm's services include: a. assisting the Debtor in managing all aspects of its business and operations, with an emphasis on budgeting, cash management and finance; b. reviewing and evaluating the Debtor's financial condition, operations, financial projections, and related matters with the objective of assisting the Debtor in enhancing enterprise value; c. assisting the Debtor in developing a reorganization plan and the assumptions underlying such a plan; d. assisting in the review, analysis and negotiations for settlements with secured lenders, vendors and other creditors; e. assisting the Debtor in managing its business and operations through the bankruptcy process; f. providing testimony; g. assisting in the decision making and management of the Debtor; h. reporting to the board of directors on the Debtor's operations and consulting the board routinely; and i. performing other work as requested by the Debtor. Newpoint will be paid at these rates: Senior Managing Director $325 per hour Managing Director $295 per hour Director $275 per hour Analyst $225 to $265 per hour Accounting/Bookkeeper $165 to $200 per hour Administration/Field Runner $125 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. The retainer fee is $120,000. Kenneth Yager, a partner at Newpoint, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Kenneth Yager Newpoint Advisors Corporation 1320 Tower Rd. Schaumburg, IL 60173 Tel: (800) 306-1250 Email: kyager@newpointadvisors.us About Peeled Inc. Peeled Inc. -- https://peeledsnacks.com -- is a manufacturer of "healthy" snacks offering organic, gluten-free, vegan, kosher options. Peeled Inc. filed a petition under Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Case No. 21-10513) on March 3, 2021. The Debtor had between $1 million and $10 million in both assets and liabilities at the time of the filing. The Debtor tapped Sugar Felsenthal Grais & Helsinger, LLP and Archer & Greiner, P.C. as its bankruptcy counsel, and Rupp Baase Pfalzgraf Cunningham, LLC as its special counsel. Newpoint Advisors Corporation is the restructuring advisor. PEELED INC: Seeks to Hire Rupp Baase as Special Counsel ------------------------------------------------------- Peeled, Inc., seeks approval from the U.S. Bankruptcy Court for the District of Delaware to employ Rupp Baase Pfalzgraf Cunningham LLC as special counsel. The firm's services include: a. representing the Debtor with regard to ongoing and daily human resources matters, including hiring and firing decisions and processes, benefits, and internal investigations; b. acting as litigation counsel in the areas of employment disputes, commercial and business disputes, and class action litigation brought against the Debtor under the Americans with Disabilities Act; and c. advising the Debtor's management and Board of Directors on issues related to executive employment contracts, as well as issues related to COVID-19, executive orders, requirements, leave programs, testing, and compliance. The firm will be paid at these rates: Partners $395 to $495 per hour Associates $325 per hour Paralegals $100 to $175 per hour As of the Petition Date, the Debtor owes the firm the amount of $72,225.99 for legal services rendered before the Petition Date, which the firm has agreed to waive at the Debtor's request. The firm will also be reimbursed for reasonable out-of-pocket expenses incurred. David R. Pfalzgraf, Jr., Esq. a partner at Rupp Baase Pfalzgraf Cunningham LLC, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: David R. Pfalzgraf, Jr., Esq. Rupp Baase Pfalzgraf Cunningham LLC 600 Liberty Building, 424 Main. St. Buffalo, NY 14202 Tel: (716) 854-3400 Fax: (716) 332-0336 E-mail: pfalzgraf@ruppbaase.com About Peeled, Inc. Peeled Inc. -- https://peeledsnacks.com -- is a manufacturer of "healthy" snacks offering organic, gluten-free, vegan, kosher options. Peeled Inc. filed a bankruptcy petition under Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Case No. 21-10513) on March 3, 2021. The Debtor had between $1 million and $10 million in both assets and liabilities at the time of the filing. Sugar Felsenthal Grais & Helsinger, LLP and Archer & Greiner, P.C. serve as the Debtor's legal counsel. PENSKE AUTOMOTIVE: Moody's Alters Outlook on Ba1 CFR to Stable -------------------------------------------------------------- Moody's Investors Service, Inc. affirmed all ratings of Penske Automotive Group, Inc. including the Ba1 corporate family rating, Ba1-PD probability of default rating and Ba3 senior subordinated notes rating. The speculative grade liquidity rating remains an SGL-2. The outlook was changed to stable from negative. "The outlook change to stable recognizes Penske's ability to improve EBITDA in 2020 despite significant COVID related headwinds, particularly in its UK business, as it threw the necessary cost levers to preserve profitabilitywhich more than offset a decline in revenue," stated Moody's Vice President Charlie O'Shea. "Its quantitative profile has improved meaningfully following sizable debt reductions undertaken in 2020, with debt/EBITDA now around 3.5 times and EBIT/interest at 3.6 times, and we expect this coverage metric to continue to improve following the debt reduction as well as some permanence with respect to cost reductions," continued O'Shea. "The affirmation recognizes Penske's size, flexible auto dealer operating model, and its diversity outside of auto retail, particularly its sizeable ownership stake of Penske Truck Leasing, and highly-experienced management team," added O'Shea. Affirmations: Issuer: Penske Automotive Group, Inc. Probability of Default Rating, Affirmed Ba1-PD Corporate Family Rating, Affirmed Ba1 Senior Subordinated Regular Bond/Debenture, Affirmed Ba3 (LGD6) Outlook Actions: Issuer: Penske Automotive Group, Inc. Outlook, Changed To Stable From Negative RATINGS RATIONALE Penske's Ba1 corporate family rating considers its position as the world's largest auto dealer by revenue, with balance between its US and international divisions, its diverse business model outside of the auto retail business, especially the positive impact of its 29% ownership stake in Penske Truck Leasing, and opportunities for future prudent growth across its numerous platforms. Ratings also consider Penske's financial policy, which has become more balanced in recent years, particularly where shareholder distributions are concerned, and its good liquidity, as reflected by its SGL-2. Penske's good liquidity is supported by its $1.05 billion in revolving credit facilities and $4 billion in floor plan financing. The stable outlook considers Penske's fairly predictable operating performance, with the ability to "flex" its operations to deal with potential flux in any one segment or geography due to any reason, as occurred during 2020 in reaction to the coronavirus. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be upgraded if operating performance continues to improve and financial policy remains balanced such that debt/EBITDA is maintained below 3.5 times and EBIT/interest is sustained above 5 times, with liquidity remaining at least good. In addition, Penske would need to demonstrate a commitment to policies consistent with an investment grade rating. Ratings could be downgraded if liquidity were to weaken, or if either softening operating performance or a more aggressive financial policy resulted in debt/EBITDA rising above 4.75 times or EBIT/interest sustained below 3.5 times. The principal methodology used in these ratings was Retail Industry published in May 2018. Headquartered in Bloomfield Hills, Michigan, Penske Automotive Group, Inc. is a diversified retailer of automobiles and trucks, with annual revenues of around $22 billion. PRIORITY HOLDINGS: Moody's Assigns B2 CFR on Planned Refinancing ---------------------------------------------------------------- Moody's Investors Service assigned a B2 Corporate Family Rating, B2-PD Probability of Default Rating and SGL-2 Speculative Grade Liquidity rating to Priority Holdings, LLC. The proposed senior secured credit facilities were assigned a rating of B2. At the same time, Moody's withdrew the Caa1 CFR, Caa1-PD PDR and SGL-4 SGL rating of Priority Payment Systems Holdings, LLC (a wholly owned subsidiary). The rating outlook is stable. The action follows Priority's announcement of a planned refinancing of its debt capital structure in conjunction with the pending acquisition of Finxera Holdings, Inc. "Priority reduced outstanding debt in 2020 and finished the year with a strengthened credit profile despite the weak macro environment" said Peter Krukovsky, Moody's Senior Analyst. "Finxera's solid credit characteristics, the related refinancing of the debt capital structure and equity capital issuance position Priority for further positive credit profile evolution. The upgrade incorporates governance considerations, including expectation of balanced financial policies." The following rating actions were taken: Assignments: Issuer: Priority Holdings, LLC Probability of Default Rating, Assigned B2-PD Speculative Grade Liquidity Rating, Assigned SGL-2 Corporate Family Rating, Assigned B2 Senior Secured 1st Lien Revolving Credit Facility, Assigned B2 (LGD3) Senior Secured 1st Lien Term Loan B, Assigned B2 (LGD3) Senior Secured 1st Lien Delayed Draw Term Loan, Assigned B2 (LGD3) Withdrawals: Issuer: Priority Payment Systems Holdings, LLC Corporate Family Rating, Withdrawn , previously rated Caa1 Probability of Default Rating, Withdrawn , previously rated Caa1-PD Speculative Grade Liquidity Rating, Withdrawn , previously rated SGL-4 Outlook Actions: Issuer: Priority Holdings, LLC Outlook, Assigned Stable RATINGS RATIONALE Priority's credit profile pro forma for the pending acquisition of Finxera will be meaningfully improved compared to the situation at the onset of the pandemic. The merchant acquiring business has outperformed expectations since early 2020 with support from card not present volumes and specialty acquiring, and the company grew revenues and sustained margins during the downturn. The divestiture of RentPayment at a gain with proceeds used for debt repayment contributed to Moody's adjusted total debt reduction of $116 million in 2020. Finally, the acquisition of Finxera (purchase price $425 million, expected to close in Q3 2021) adds an asset with a solid credit profile, and the concurrent capital structure refinancing contemplates issuance of $50 million in common equity to Finxera shareholders and $200 million in preferred stock to a new investor. Priority intends to replace the preferred stock with permanent equity capital over time, and Moody's treats it as equity capital in our credit ratios. These factors have driven Priority's leverage down from about 8x at the end of 2019 to 5.3x at the end of 2020 pro forma for Finxera, and Moody's projects leverage to decline further in 2021 with continued EBITDA growth. While Priority's credit profile has improved, the company operates in a highly competitive SMB merchant acquiring sector which has seen share gains by vertical-specific integrated payments providers, e-commerce focused providers and payment facilitators. Additionally, Finxera's growth may be muted in the near-term as lender forbearance, government stimulus and increased consumer saving rates during the pandemic reduce impetus for consumers to seek debt settlement. The operations of Priority and Finxera are disparate in nature and Moody's assumes minimal support from synergies in the near-term. As such, continued prudent capital structure strategy will be important for a sustained improvement of the credit profile. Over time, management intends to pursue alternatives to broaden the equity investor base consistent with public company status. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectation of organic EBITDA growth driving gradual reduction of Moody's adjusted total leverage to about 5x at the end of 2021. The ratings could be upgraded if Priority demonstrates consistent revenue and EBITDA growth, and if Moody's adjusted total leverage is sustained below 4.5x. The ratings could be downgraded if Priority's revenues or profitability decline, or if Moody's adjusted total leverage exceeds 6.0x. The new credit facility is expected to contain covenant flexibility for transactions that could adversely affect creditors, including incremental facility capacity, the ability to release a guarantee when a subsidiary is not wholly owned, and lack of "blocker" restrictions on collateral leakage through transfer to unrestricted subsidiaries. With pro forma net revenues of $464 million in 2020, Priority is payment solutions provider. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. REGIONAL HEALTH: Posts $9.7 Million Net Loss in 2020 ---------------------------------------------------- Regional Health Properties, Inc. filed with the Securities and Exchange Commission its Annual Report on Form 10-K disclosing a net loss attributable to common stockholders of $9.68 million on $17.58 million of total revenues for the year ended Dec. 31, 2020, compared to a net loss attributable to common stockholders of $3.49 million on $20.13 million of total revenues for the year ended Dec. 31, 2019. As of Dec. 31, 2020, the Company had $108.02 million in total assets, $96.92 million in total liabilities, and $11.10 million in total stockholders' equity. The Company intends to pursue measures to grow its operations, streamline its cost infrastructure and otherwise increase liquidity including: (i) refinancing or repaying debt to reduce interest costs and mandatory principal repayments, with such repayment to be funded through potentially expanding borrowing arrangements with certain lenders; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) modifying the terms of existing leases; (iv) replacing certain tenants who default on their lease payment terms; and (v) reducing other and general and administrative expenses. Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months from March 29, 2021 (the date of this filing). At Dec. 31, 2020, the Company had $4.2 million in unrestricted cash. During the twelve months ended Dec. 31, 2020, the Company generated positive cash flow from continuing operations of $2.5 million and anticipates continued positive cash flow from operations in the future, subject to the continued uncertainty of the COVID-19 pandemic and its impact on the Company's business, financial condition and results of operations. As of Dec. 31, 2020, one operator (Wellington) accounted for approximately $1.3 million of rent arrears recorded in "Accounts receivable, net of allowance" on its consolidated balance sheets. The Company has recorded an allowance of $1.4 million against a receivable of $2.7 million because the Company has determined that a full allowance is not presently warranted as the Company has terminated the lease effective Dec. 31, 2020 and received ownership of certain of Wellington's receivables and is receiving on-going collection of the receivables. The Company is current with all of its debt and other financial obligations. The Company has benefited from various, stimulus measures made available to it through the CARES Act enacted by Congress in response to the COVID-19 pandemic which allowed for, among other things: (i) a deferral of debt service payments on U.S. Department of Agriculture ("USDA") loans to maturity, (ii) an allowance for debt service payments to be made out of replacement reserve accounts for U.S. Department of Housing and Urban Development ("HUD") loans and (iii) debt service payments to be made by the SBA on all SBA loans. A full-text copy of the Form 10-K is available for free at: https://www.sec.gov/Archives/edgar/data/1004724/000156459021016146/rhe-10k_20201231.htm About Regional Health Regional Health Properties, Inc. (NYSE American: RHE) (NYSE American: RHEpA) -- http://www.regionalhealthproperties.com-- is a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term healthcare through facility lease and sub-lease transactions. ROBBIN'S NEST: May 19 Plan & Disclosure Hearing Set --------------------------------------------------- On March 25, 2021, debtor Robbin's Nest for Children LLC filed with the U.S. Bankruptcy Court for the Southern District of Texas a Disclosure Statement describing Plan of Reorganization. On March 28, 2021, Judge Jeffrey Norman conditionally approved the Disclosure Statement and established the following dates and deadlines: * May 10, 2021, is fixed as the last day for filing written acceptances or rejections of the plan. A ballot summary shall be filed no later than 48 hours after this deadline. * May 19, 2021, at 1:30 p.m. is fixed for the hearing on final approval of the disclosure statement (if a written objection has been timely filed) and for the hearing on confirmation of the plan. * May 10, 2021, is fixed as the last day for filing and serving written objections to the disclosure statement and confirmation of the plan. A full-text copy of the order dated March 28, 2021, is available at https://bit.ly/3whWoxz from PacerMonitor.com at no charge. The Debtor is represented by: Margaret M. McClure, Esq. LAW OFFICE OF MARGARET M. MCCLURE 909 Fannin, Suite 3810 Houston, Tx 77010 Phone: (713) 659-1333 Fax: (713) 658-0334 E-mail: margaret@mmmcclurelaw.com About Robbin's Nest for Children Robbin's Nest for Children LLC sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Tex. Case No. 20 33824) on July 31, 2020, listing under $1 million in both assets and liabilities. Judge Jeffrey P. Norman oversees the case. Margaret M. McClure, Esq., at the LAW OFFICE OF MARGARET M. MCCLURE, is the Debtor's counsel, and John F. Coggins is the Debtor's accountant. SANITECH LLC: Seeks Approval to Hire Dennery as Legal Counsel ------------------------------------------------------------- Sanitech, LLC seeks approval from the U.S. Bankruptcy Court for the Eastern District of Kentucky to hire Dennery, PLLC as its legal counsel. The firm will render these services: (a) prepare legal documents required by the Bankruptcy Code and Rules; (b) advise the Debtor as to any potential sale or liquidation of its assets and prepare related agreements; (c) draft and file a disclosure statement and plan of reorganization and arrange for the solicitation of votes from creditors; (d) draft preliminary projections for a plan reorganization based on historical information; (e) communicate and seek common ground with Debtor's major creditors; (f) correspond with the U.S. trustee and prepare any pre-confirmation applications or reports required by related administrative rules or guidelines; (g) take actions necessary to preserve and protect the Debtor's assets and interests, including without limitation objecting to claims, bringing adversary actions, and responding to or defending against any objections, contests or adversary proceedings; and (h) attend the initial debtor interview, meeting of creditors and court hearings. The Debtor has agreed to deposit a retainer of $12,500. Dennery is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code, according to court papers filed by the firm. The firm can be reached through: J. Christian A. Dennery, Esq. Dennery, PLLC PO Box 121241 Covington, KY 41012 Tel: 859-445-5495 Fax: 859-286-6726 Email: jcdennery@dennerypllc.com About Sanitech LLC Sanitech, LLC sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Ky. Case No. 21-20120) on Feb. 22, 2021, listing under $1 million in both assets and liabilities. J. Christian A. Dennery, Esq., at Dennery, PLLC, represents the Debtor as legal counsel. SCHOOL DISTRICT: Seeks to Hire Bruner Wright as Legal Counsel ------------------------------------------------------------- School District Services, Inc. seeks approval from the U.S. Bankruptcy Court for the Northern District of Florida to employ Bruner Wright, P.A. as legal counsel in its Chapter 11 case. The firm will be paid at these rates: Attorneys $300 to $400 per hour Paralegals $150 per hour Bruner Wright was paid a retainer of $9,238 by the Debtor's principal. Of that amount, $1,738 was used to pay the filing fee and $600 was utilized in connection with the firm's pre-bankruptcy services. The firm will also be reimbursed for out-of-pocket expenses incurred. Byron Wright III, Esq. a partner at Bruner Wright, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Byron Wright III, Esq. Bruner Wright, P.A. 2810 Remington Green Circle Tallahassee, FL 32308 Tel: (850) 385-0342 Fax: (850) 270-2441 Email: twright@brunerwright.com About School District Services School District Services, Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Fla. Case No. 21-40092) on March 19, 2021. Ivery Luckey, chief executive officer, signed the petition. At the time of the filing, the Debtor disclosed assets of between $1 million and $10 million and liabilities of the same range. Bruner Wright, P.A. is the Debtor's legal counsel. SDI PROPERTIES: Trustee Hires Miles & Stockbridge as Counsel ------------------------------------------------------------ Patricia Jefferson, the Chapter 11 trustee for SDI Properties, LLC, seeks approval from the U.S. Bankruptcy Court for the District of Maryland to employ Miles & Stockbridge P.C. as her legal counsel. The firm will provide these services: a. advise the trustee with respect to her rights, duties, and powers in the Debtor's Chapter 11 case, including investigating and prosecuting claims and causes of action; b. assist the trustee in her consultations with the Debtor and other parties in interest relative to the administration of the case; c. assist the trustee in analyzing the claims of creditors and in negotiating with holders of claims; d. assist the trustee in her investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor and of the operation of the Debtor's business; e. assist the trustee in her investigation of the liens and claims of the Debtor's pre-bankruptcy creditors and the prosecution of any claims or causes of action revealed by such investigation; f. assist the trustee in connection with asset dispositions; g. assist the trustee in proposing a plan of reorganization and in preparing a disclosure statement and related documents; h. advise the trustee as to her communications with secured and unsecured creditors; i. represent the trustee at hearings and other proceedings; j. review and analyze applications, orders, statements of operations, and schedules filed with the court and advise the trustee as to propriety of the estate; k. assist the trustee in preparing pleadings and applications; l. perform other legal services. Miles & Stockbridge will be paid at these rates: Principals $415 to $1,025 per hour Associates $285 to $495 per hour Staff Attorney/Of Counsel $305 to $800 per hour Paralegals $195 to $390 per hour Law Clerks & Law Graduates $275 to $375 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. As disclosed in court filings, Miles & Stockbridge is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Patricia B. Jefferson, Esq. Emily K. Devan, Esq. John R. Goodridge, Esq. Miles & Stockbridge P.C. 100 Light Street, 10th Floor Baltimore, MD 21202 Tel: (410) 385-3405 Email: bktrustee@milesstockbridge.com edevan@milesstockbridge.com jgoodridge@milesstockbridge.com About SDI Properties SDI Properties, LLC filed a petition under Chapter 11 of the Bankruptcy Code (Bankr. D. Md. Case No. 20-20650) on Dec. 8, 2020. In the petition signed by Trevor Sie-Duke, managing member, the Debtor was estimated to have $1 million to $10 million in assets and $10 million to $50 million in liabilities. Judge Lori S. Simpson oversees the case. The Debtor tapped the Law Offices of Richard B. Rosenblatt, PC as its legal counsel and Gabriel Wureh, an accountant practicing in Bowie, Md. Patricia B. Jefferson is the Chapter 11 trustee appointed in the Debtor's bankruptcy case. Miles & Stockbridge P.C. is the Debtor's legal counsel. STA TRAVEL: Seeks to Hire CBRE Inc. as Real Estate Advisor ---------------------------------------------------------- STA Travel, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Delaware to employ CBRE, Inc. as real estate advisor. The firm will provide these services: a. confer with the Debtor's representatives to discuss its needs and the parameters for a sale of its lease for a property located at 722 Broadway, N.Y.; b. develop, design and implement a marketing plan and negotiate for the assignment, sale or other disposition of the lease; c. provide real estate advice, analysis, market studies, market data, comparables, and other relevant information; d. coordinate and organize the bidding procedures and sale process; and e. assist the Debtor's attorneys and businesspersons responsible for the documentation of any proposed transactions. CBRE will be paid at these rates: a. A retainer fee of $5,000. b. In the event of (i) a sale of the Broadway lease, or (ii) an assignment and assumption of the Broadway lease, the firm shall be entitled to a fee calculated as 10 percent of the gross sales proceeds of less than $500,000; 8 percent of the gross sales proceeds between $500,001 and $750,000; 6 percent of the gross sales proceeds between $750,001 and $1 million; and 4 percent of the gross sales proceeds in excess of $1 million for the subject transaction. The firm will also be reimbursed for out-of-pocket expenses incurred. Bill Wright, a partner at CBRE, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Bill Wright CBRE, Inc. 2100 McKinney Avenue, Suite 1250 Dallas, TX 757201 Tel: (214) 863-4101 Email: bill.wright@cbre.com About STA Travel STA Travel Inc., the U.S. unit of Switzerland-based STA Travel Holding AG, operates as a travel company. It operated a storefront location at 722 Broadway, N.Y. On March 3, 2021, STA Travel filed a petition under Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Case No. 21-10511). STA Travel had between $1 million and $10 million in both assets and liabilities as of the bankruptcy filing. The Debtor tapped Cozen O'Connor as its legal counsel and CBRE, Inc. as its real estate advisor. Omni Agent Solutions is the claims agent. SUZUKI CAPITAL: Seeks to Hire Platzer Swergold as Legal Counsel --------------------------------------------------------------- Suzuki Capital, LLC seeks approval from the U.S. Bankruptcy Court for the Southern District of New York to employ Platzer Swergold Levine Goldberg Katz & Jaslow, LLP as its legal counsel. The firm will provide these services: a. advise the Debtor regarding the administration of its Chapter 11 case; b. represent the Debtor before the court and advise the Debtor of pending litigation, hearings, motions and of the decisions of the court; c. analyze all applications, orders and motions filed with the court by third parties; d. attend hearings and represent the Debtor at all examinations; e. communicate with creditors; f. prepare applications and orders in support of positions taken by the Debtor, prepare witnesses and review documents; g. confer with any accountants, brokers and consultants retained by the Debtor and any other party; h. assist the Debtor in negotiations concerning the terms of a proposed plan of reorganization; i. prepare a plan of reorganization; and j. perform other legal services necessary to administer the Debtor's Chapter 11 case. Platzer will be paid at these rates: Attorneys $480 to $625 per hour Paralegals $225 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. As disclosed in court filings, Platzer is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Clifford A. Katz, Esq. Platzer Swergold Levine Goldberg Katz & Jaslow, LLP 475 Park Avenue South, 18 th Floor New York, NY 10016 Tel: (212) 593-3000 Email: ckatz@platzerlaw.com About Suzuki Capital Suzuki Capital, LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Case No. 21-10338) on Feb. 23, 2021. Sammy Isamu Suzuki, chief executive officer, signed the petition. In the petition, the Debtor disclosed assets of between $100,000 and $500,000 and liabilities of between $1 million and $10 million. Judge Michael E. Wiles oversees the case. Platzer Swergold Levine Goldberg Katz & Jaslow, LLP is the Debtor's legal counsel. TENET HEALTHCARE: Fitch Affirms 'B' LongTerm IDR, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Tenet Healthcare Corp.'s (THC) ratings, including its Long-Term Issuer Default Rating (IDR) at 'B'. The Rating Outlook remains Stable. The affirmation and Stable Outlook reflect the issuer's solid competitive position as a healthcare provider and the relative durability of its operational and financial results amid the pandemic, offset in part by persistently high debt leverage. Fitch expects leverage will remain in line with the 'B' ratings through the rating horizon, but notes the potential for further improvement depending on Tenet's capital allocation priorities, including its potential Conifer segment spin-off. KEY RATING DRIVERS Hospitals Drive Operating Outlook: Tenet is one of the largest for-profit operators of acute care hospitals in the U.S., and a leading operator of ambulatory surgery centers (ASCs) through its ownership of United Surgical Partners International (USPI). USPI provides setting diversification, which Fitch expects will continue to benefit from secular tailwinds. Tenet has set a public goal of having USPI's EBITDA increase to 50% of total and the hospital segment decrease to 35% in 2023. Fitch expects Tenet will use a combination of acquisitions and de novo openings in USPI, hospital dispositions and the relative growth rates for each segment to make progress against its goal. For example, Tenet acquired 45 ASCs for $1.1 billion in December 2020. Until then, the hospital segment will be the main driver of the company's results, with a contribution of about 80% and 50% of consolidated revenues and EBITDA, respectively. Pandemic Having Manageable Impact: Fitch expects healthcare providers like Tenet will continue to be negatively impacted by the pandemic (i.e. lower volumes, higher operating expenses) through at least 2021. While volumes have not fully rebounded to pre-pandemic levels, they have rebounded sharply from the 2Q20 lows, and stabilized at levels where Tenet can support its current capitalization and rating. Lower volumes have been offset in part by some favorable rate changes from government payors, higher acuity mix and Tenet's efforts to manage operating expenses. Business Improvements Clouded by Pandemic: Prior to the pandemic, Tenet had made progress against its objectives to improve operations, rationalize its hospital footprint by exiting non-core assets and markets and grow USPI. Fitch expects operating EBITDA margins will rebound in 2021 towards pre-pandemic levels of 13%-14% up from around 12% in 2016, and improve further as the higher margin USPI segment's contributions become larger than the hospital segment. Fitch expects Tenet will continue to focus on growing USPI through both capital expenditures and acquisitions, which follows Tenet's increased ownership stake to 95% from around 50%. Despite pre-pandemic improvements in margins, Tenet's profitability continues to lag its closest industry peers, which supports Fitch's view that sustainably higher margins for Tenet are achievable but not explicitly assumed in Fitch's forecasts. Persistently High Gross Leverage: Fitch expects gross leverage (after adjusting for cash distributions to non-controlling interests (NCI) and the recent repayment of $478 million of senior unsecured notes) will sustain around 6x through the rating horizon, which is generally consistent with Tenet's public comments of targeting less than 5x on a net basis before NCI for 2021. The affirmation and Stable Outlook reflect that gross leverage has remained high relative to peers despite the aforementioned improvements. Gross debt has remained steady with $15.1 billion currently outstanding pro forma for the recent debt repayment as compared to $15.5 billion at Dec. 31, 2016. Fitch-calculated leverage will improve by about 1x from around 7x towards 6x. Latent Catalysts for Positive Momentum: The Stable Outlook reflects Fitch's view that leverage will sustain around 6x as compared to the 5.5x rating sensitivity for positive momentum. Nonetheless, Fitch believes there are paths to positive rating actions in the future. Tenet's management has publicly stated its intentions to further improve its leverage, and is evaluating means to do so. Specific and credible plans could be a catalyst for positive momentum, as could more details on the timing, structure and financial implications of a potential spin-off of its Conifer segment. Lastly, operating performance and financial results that meaningfully outperform Fitch's expectations could drive leverage closer to 5.5x are not assumed but possible. DERIVATION SUMMARY Tenet's 'B' Long-Term IDR reflects the company's highly leveraged balance sheet. Tenet's leverage is higher than its 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 similarly-rated peer Prime Healthcare Services, Inc. (B) and lower-rated peer Community Health Systems (CHS; CCC), which have lower and higher leverage than Tenet, respectively. 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 the rating case for the issuer include: -- Revenues and operating EBITDA rebound in 2021 but remain slightly below pre-pandemic levels before including a full year's contributions from the SCD acquisition in late 2020; -- Revenue growth of 3%-5% thereafter with some margin improvement as the EBITDA mix shifts towards USPI; -- Operating cashflows negatively affected in 2021 and 2022 as certain benefits from the CARES Act are unwound (e.g. Medicare Advance Payments, deferred payroll taxes); -- Capex approximating 3%-4% of revenues per year and $250 million of acquisitions per year to accelerate USPI's growth; -- The repayment of the $478 million of notes due 2025 in 2021 and no other meaningful changes to gross debt or equity issuances/repurchases; -- Fitch has not explicitly assumed the potential Conifer spin off, or the acquisition of the remaining interest in USPI. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- An expectation of debt/EBITDA after associate and minority dividends sustained below 5.5x; -- An expectation for FCF margin sustained above 2%. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Debt/EBITDA after associate and minority dividends sustained above 7.0x; -- An expectation for consistently break-even to negative FCF margin. BEST/WORST CASE RATING SCENARIO International scale credit 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 Liquidity Profile Solid: Tenet's sources of liquidity include $2.4 billion of cash at Dec. 31, 2020. The company has access to an undrawn $1.9 billion ABL facility that 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. The aforementioned sources were likely reduced by $478 million upon the repayment of the senior unsecured notes in March 2021. The next significant debt maturity is $1.9 billion of unsecured notes maturing in June 2023. Fitch expects free cash flow will be between $300 million to $500 million per year before the unwinding of benefits from the CARES Act (i.e. $1.5 billion of advanced Medicare payments and $275 million of deferred payroll taxes) in 2021 and 2022. DEBT NOTCHING CONSIDERATIONS: The 'BB'/'RR1' and 'B+'/'RR3' 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 51%-70% 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%-50% range. 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. Fitch does not believe that the coronavirus pandemic has changed the longer-term valuation prospects for the hospital industry, and Tenet's post-reorganization EBITDA and multiple assumptions are unchanged from the last ratings review. The post-reorganization EBITDA estimate is approximately 28% lower than Fitch's 2020 EBITDA for Tenet excluding grant income 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. 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 50% of consolidated EBITDA (53% pre-pandemic and 47% for 2021 guidance which reflects 2020 ASC acquisitions), and Fitch uses this value as a proxy to determine the rough value of the secured debt collateral of $4.5 billion. Fitch assumes this amount is completely consumed by the ABL facility and the first-lien lenders, leaving $4.5 billion of residual value to be distributed on a pro rata basis to the remaining first-lien claims and the second-lien secured and unsecured claims. Tenet's debt instrument ratings are sensitive to relative debt levels given the significance of the assets outside of the collateral pool. Upsized issuances could have rating implications for all debt levels depending on the use of proceeds given each instrument's recoveries are towards the low-end of their respective Recovery Rating range. 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 of 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 the ABL facility in a bankruptcy scenario, and includes that amount in the claims waterfall. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch has removed the effects of certain portions of the CARES Act from operating EBITDA and changes in working capital in 2020 that were deemed to be non-recurring (i.e. grant monies) or temporary (i.e. accelerated Medicare payments, deferred payroll taxes) and reallocated to non-recurring lines. ESG CONSIDERATIONS Tenet has an ESG Relevance Score of '4' for Exposure to Social Impacts due to societal and regulatory pressures to constrain growth in healthcare spending in the U.S. This dynamic has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. TI GROUP: Moody's Affirms B1 CFR & Alters Outlook to Positive ------------------------------------------------------------- Moody's Investors Service affirmed TI Group Automotive Systems L.L.C.'s B1 corporate family rating, B1-PD Probability of Default Rating and B1 senior secured bank credit facility rating. The Speculative Grade Liquidity Rating was upgraded to SGL-2. The rating outlook was changed to positive from stable. The actions reflect Moody's expectation for TI Group to resume margin expansion in 2021, boosted by recovering light vehicle volumes and increasing content per vehicle on the range of electric vehicle platforms. The actions also include expectations for the company to extend its track record of solidly positive free cash flow generation, providing flexibility to accelerate debt repayment beyond internal growth investments. RATINGS RATIONALE TI Group's ratings reflect its market and technological leadership position in automotive fluid systems (fluid storage, carrying and delivery systems), highly diverse and balanced customer and geographic exposures and solid margin profile supported by a flexible cost structure. The company's ability to easily pivot to electrified applications, including battery electric vehicle thermal products and systems and hybrid electric vehicle thermal products and systems and pressure resistant fuel tanks, should continue driving greater content per vehicle over time. TI Group's advancing technologies resulted in nearly half of 2020's new business wins coming from electric vehicle platforms, highlighting good balance between traditional internal combustion engine revenues and evolving focus towards electric propulsion Debt-to-EBITDA is expected to fall to the 3x-range (after Moody's standard adjustments) by year-end 2021 with free cash flow positive but lower than 2020's level due to growth in working capital and capital expenditures, and resumption of the dividend policy. Moody's anticipates margins to rebound over the next couple of years along with continued growth in global light vehicle volumes. The positive outlook incorporates Moody's expectation for margins to sustain a trajectory back to levels generated before the pandemic by late-2022, while generating free cash flow consistent with that timeframe despite higher growth spending. The outlook also considers TI Group's success in capturing similar-margin new business across all platforms, including electric vehicles as they steadily gain market share. TI Group's liquidity is good, supported by Moody's expectations of cash in the EUR400 million - EUR430 million range and availability under the revolving credit facility. Cash on hand was approximately EUR486 million and the $225 million revolving credit facility was fully available at December 31, 2020. Moody's anticipates free cash flow generation of approximately EUR70 million in 2021 as recovering global automotive production will likely consume cash in the first half of 2021. The following ratings/assessments are affected by the action: Ratings Affirmed: Issuer: TI Group Automotive Systems L.L.C. Corporate Family Rating, Affirmed B1 Probability of Default Rating, Affirmed B1-PD Senior Secured Term Loan B, Affirmed B1 (LGD3) Senior Secured Revolving Credit Facility, Affirmed B1 (LGD3) Ratings Upgraded: Issuer: TI Group Automotive Systems L.L.C. Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3 Outlook Actions: Issuer: TI Group Automotive Systems L.L.C. Outlook, Changed To Positive From Stable FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded with improving earnings that provide the expectation of continued, solid free cash flow, along with debt reduction such that debt-to-EBITDA is sustained below 2.5x and EBITA-to-interest sustained over 4.5x. Important considerations for any upgrade would be good liquidity and financial policies that balance shareholder returns with capital reinvestment and debt reduction. The ratings could be downgraded with the expectation of EBITA-to-interest under 3.5x, debt-to-EBITDA sustained above 4x into 2021, or a deteriorating liquidity profile. The ratings could also be downgraded if shareholder distributions or acquisitions result in leverage expected to be sustained at the above threshold. TI Group's products and services are exposed to material environmental risks from increasing regulations on carbon emissions. Automotive manufacturers have accelerated their focus on electrified products to meet increasingly stringent regulatory requirements. As automotive sales shift to hybrid electric and battery electric vehicles, TI Group is shifting its product mix more towards thermal cooling and heating products and plastic and pressure-resistant fuel tanks. Nonetheless, even with this gradual shift to electrification, internal combustion engines will maintain a meaningful presence in vehicle powertrains over the next decade. The principal methodology used in these ratings was Automotive Supplier Methodology published in January 2020. TI Group Automotive Systems, L.L.C., a subsidiary of TI Fluid Systems plc, is a leading global manufacturer of fluid storage, carrying and delivery systems primarily serving automotive OEMs of light vehicles. Fuel Tank and Delivery Systems represent roughly 45% of revenues with Fluid Carrying Systems 55%. Revenues for the year ended December 31, 2020 were approximately EUR2.8 billion. TI Fluid Systems plc has been majority owned by affiliates of and funds advised by Bain Capital, LP since 2015. TORY BURCH: Moody's Assigns First Time Ba3 Corp. Family Rating -------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to Tory Burch LLC, including a Ba3 corporate family rating, Ba3-PD probability of default rating and Ba2 ratings to the company's proposed $200 million senior secured first lien revolver expiring 2026 and $600 million senior secured first lien term loan due 2028. The outlook is positive. Proceeds from the proposed term loan will be used to refinance existing debt, repurchase a minority equity stake, and pay for fees and expenses. The rating assignment incorporates governance considerations, including the company's balanced financial strategies including the maintenance of moderate leverage and very good liquidity. The rating also reflects "key woman" risk with its founder Tory Burch, who remains closely associated with the brand and is a key driver of creative and marketing direction. The company is controlled by Tory Burch and private equity firms that support a lower level of leverage and have longer investment horizons than typical financial sponsors. Moody's assigned the following ratings for Tory Burch LLC: Corporate Family Rating, Assigned Ba3 Probability of Default Rating, Assigned Ba3-PD Senior Secured 1st Lien Revolving Credit Facility, Assigned Ba2 (LGD3) Senior Secured 1st Lien Term Loan, Assigned Ba2 (LGD3) Outlook, Assigned Positive RATINGS RATIONALE Tory Burch's Ba3 CFR reflects its well-known brand, global presence and diversified sales channels with a well-developed digital business, balanced store footprint, and tightly controlled wholesale distribution. The company has maintained solid gross margins as a result of its focus on disciplined growth and effective digital marketing strategies. Revenues performed roughly in line with luxury peers declining 15% in 2020 as a result of the pandemic, and were supported by a rapid recovery in China, relatively high e-commerce penetration, and new product launches. Moody's expects a strong earnings improvement over the next 12-18 months towards levels within 15% of 2019, driven by a recovery in global spending on footwear, accessories and apparel, particularly among the higher income demographic. Together with potential debt repayment, this would lead to lease-adjusted debt/EBITDA decreasing to 3.5-3.8x from 4.8x (pro-forma, as of fiscal year ending January 2, 2021), and EBIT/interest expense rising to about 2.7x from 1.4x. Moody's expects Tory Burch to have very good liquidity over the next 12-18 months. Pro-forma for the transaction, the company will have $148 million of cash and over $200 million of revolver availability including the undrawn US revolving credit facility. Liquidity will also benefit from positive expected free cash flow, a springing covenant-only capital structure, and a lack of near term maturities. The rating is constrained by the Tory Burch's relatively small scale and high fashion risk as a single-brand company in the highly competitive accessories, footwear and apparel category. The company also has a limited history at this scale, and although it has invested in building talent, the brand is tied to its founder, creating material key woman risk. While significant investments have been made in infrastructure over the past several years, in Moody's view further focus on omnichannel and global capabilities is needed to support the company's growth. Tory Burch is committed to social and environmental issues including through its namesake foundation and, as a luxury retailer, needs to make ongoing investments in ESG factors including responsible sourcing, product and supply sustainability, privacy and data protection. The positive outlook reflects Moody's expectations for solid earnings growth, debt repayment and very good liquidity over the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Tory Burch increases its scale and demonstrates consistent comparable sales growth, while maintaining solid operating margins, very good liquidity and a balanced financial strategy. Quantitatively, an upgrade would require debt/EBITDA sustained below 3.25 times and EBIT/interest expense above 3.5 times. The ratings could be downgraded if operating performance does not improve in 2021 as anticipated, or if gross margins decline, indicating increased promotional activity or the brand losing resonance with customers. Quantitatively, the ratings could be downgraded if debt/EBITDA is sustained above 4.25 times or EBIT/interest expense is below 2.5 times. As proposed, the new credit facilities are expected to provide covenant flexibility that if utilized could negatively impact creditors. Notable terms include the following: Incremental debt capacity up to the greater of 100% of 2020 adjusted EBITDA or 100% of future LTM adjusted EBITDA, plus unlimited amounts subject to 2.6x first lien net leverage. Except in the case of a bridge loan the terms of which provide for an automatic extension of the maturity date, no portion of the incremental may be incurred with an earlier maturity than the initial term loans. The credit agreement prohibits the sale or transfer of material intellectual property to unrestricted subsidiaries, which limits collateral "leakage" to unrestricted subsidiaries. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. The revolver has a springing net leverage covenant, which is tested if borrowings exceed 35% of capacity. The proposed terms and the final terms of the credit agreement may be materially different. Headquartered in New York, New York, Tory Burch LLC is a designer and retailer of luxury women's handbags, small leather goods, footwear, apparel and accessories. The company's products are sold through its e-commerce operations, 235 company-operated retail stores across the globe and wholesale partners. Revenue for the year ended January 2, 2021 was approximately $1.2 billion. The principal methodology used in these ratings was Retail Industry published in May 2018. TRIDENT HOLDINGS: Seeks to Hire Andersen Law Firm as Counsel ------------------------------------------------------------ Trident Holdings, LLC seeks approval from the U.S. Bankruptcy Court for the District of Nevada to employ Andersen Law Firm, Ltd. as its legal counsel. The firm will provide these services: a. advise the Debtor of its powers and duties in the continued management and operation of its business and property; b. attend meetings, negotiate with representatives of creditors and other parties in interest, and advise the Debtor on the conduct of its Chapter 11 case, including the legal and administrative requirements of operating in Chapter 11; c. take all necessary action to protect and preserve the bankruptcy estate, including the prosecution of actions on its behalf, the defense of any actions commenced against the bankruptcy estate, negotiations concerning all litigation in which the Debtor may be involved, and objections to claims filed against the bankruptcy estate; d. prepare legal papers; e. negotiate and prepare a plan of reorganization, disclosure statement and all related documents, and take any necessary action to obtain confirmation of the plan; f. advise the Debtor in connection with any sale of its assets; g. appear before the bankruptcy court, any appellate courts, and the Office of the U.S. Trustee; and h. perform all other legal services necessary to administer the Debtor's Chapter 11 case. Andersen Law Firm will be paid at these rates: Attorneys $455 per hour Paralegals $145 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. The retainer fee is $10,000. Ryan Andersen, Esq., a partner at Andersen Law Firm, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Ryan A. Andersen, Esq. Andersen Law Firm, Ltd. 3199 E Warm Springs Rd, Ste 400 Las Vegas, NV 89120 Tel: (702) 522-1992 Fax: (702) 825-2824 Email: ryan@vegaslawfirm.legal About Trident Holdings Trident Holdings, LLC filed a Chapter 11 bankruptcy petition (Bankr. D. Nev. Case No. 21-11260) on March 16, 2021. The Debtor is represented by Andersen Law Firm, Ltd. UNITED AIRLINES: Fitch Cuts IDR to 'B+' & Alters Outlook to Stable ------------------------------------------------------------------ Fitch Ratings has downgraded United Airlines' Issuer Default Rating to 'B+' from 'BB-' and revised the Outlook to Stable. The pace of air traffic recovery combined with pressure on the balance sheet will make it difficult for United to achieve credit metrics that support the 'BB-' rating before 2023, prompting the one-notch downgrade to 'B+'. United's balance sheet debt increased by $12.2 billion in 2020, equivalent to approximately 1.5 turns of 2019 EBITDAR. Gross debt may increase further assuming United draws its availability under the government Coronavirus Aid, Relief, and Economic Security (CARES) Act loan. Fitch believes that United's gross leverage could remain near 5x or higher by the end of 2023 which is high for a 'BB' category rating. United will have limited remaining unencumbered assets, leaving the company with reduced financial flexibility compared to prior to the pandemic. However, United Airlines managed the crisis effectively despite its network having more exposure to international markets that were heavily impacted by the virus. Fitch views the downside risks to United's rating as decreasing, driving the Stable Outlook. KEY RATING DRIVERS Industry Update: Airline traffic has recovered more slowly than Fitch's prior expectations through 1Q21. Global outbreaks of COVID caused a reimposition of travel restrictions and for leisure travel to be discouraged. U.S. traffic and bookings have improved materially in recent weeks around spring break, leading to rising passenger counts in March, but overall performance in 1Q21 remains weak. Fitch's prior forecasts had anticipated that at this point in the crisis, traffic would be down by approximately 40%-45% compared to 2019 levels. While passenger counts are improving to 30%- 40% on peak travel days, rolling seven-day averages remain 50% or more below 2019 levels. Traffic as measured by RPMs will be worse than passenger counts due to the lack of long-haul travel. 2Q21 and beyond may be more promising, with several carriers reporting stronger bookings. For example, American reported that bookings in recent weeks have been only 20% below 2019 levels, the largest improvement since the start of the pandemic. Traffic Rebound Expected but Uncertainties Remain: Fitch anticipates a fairly robust rebound, particular in leisure and VFR traffic, once traveler confidence improves driven by a great deal of pent up demand. Recent surveys conducted by IATA and Oliver Wyman indicate that a majority of respondents expect to travel as much or more once the pandemic is over compared to pre-pandemic level, with most respondents also indicating a desire to prioritize travel in the future. Fitch also believes that the economic impacts of the pandemic have been disproportionately weighted toward lower income households. Higher earners, who have a higher propensity to travel, have been less impacted, and may help to drive the rebound in travel later this year. Although the successful development of COVID vaccines has driven an improvement to Fitch's sector outlook, serious uncertainties remain. There is a possibility that new variants of the coronavirus could prolong the epidemic and delay a recovery in travel. Travel restrictions will also likely limit long-haul travel recovery, and the pandemic's impact on lucrative business travel remains uncertain. Improved Cash Burn: United recently announced that it expects core cash flow to turn positive in March based on the recent uptick in bookings, and to remain positive assuming the booking trajectory continues. United's definition of core cash flow excludes debt principal payments, capex and certain one-time items and so does not reflect all cash inflows and outflows. Nonetheless, the turn to positive represents a meaningful improvement after burning cash for nearly a full year. Material Cost Cuts: Permanent changes to the airline's cost structure will be key to returning to pre-pandemic levels of profitability. United announced on its first quarter earnings call that it will permanently reduce annual operating costs by $2 billion and expects to exceed 2019 EBITDA margins by 2023. Fitch's forecast is more conservative. The agency does not anticipate a return to 2019 level margins until 2024 driven by a slow rebound in demand. Expense reduction comes through a permanently lower level of management head count, reduced number of regional partners and renegotiated agreements with suppliers. Capital spending: United expects gross capex to total $4.4 billion in 2021 and it has capital commitments for nearly $3 billion in both 2022 and 2023. The company has stated that it will not take delivery of new aircraft unless they are fully financed, so capital spending is not expected to be a major net drain on cash. However, the company's ability to reduce its gross debt balance will be limited over the next two years. United's fleet is older than its network peers with an average age of 16 years vs. 13.5 for Delta and 10.8 for American, resulting in relatively high spending requirements at United. Recovery Ratings: Fitch uses a bespoke approach to recovery ratings for issuers rated in the 'B' category as opposed to a generic uplift approach for 'BB' category issuers. Fitch's recovery analysis assumes that United would be reorganized as a going concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. The going concern (GC) EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which the agency bases the enterprise valuation. Fitch uses a GC EBITDA estimate of $5.5 billion and a 5.5x multiple, generating an estimated GC enterprise value (EV) of $27.3 billion after an estimated 10% in administrative claims. This analysis yields a recovery rating of 'RR2' for senior secured creditors, reflecting the possibility that recovery for secured parties could be diluted given the amount of senior debt raised through the downturn. Likewise, United's unsecured recovery rating of 'RR6' reflects the large amount of secured debt in United's capital structure. Enhanced Equipment Trust Certificate (EETC) Ratings: Subordinated tranche ratings of United's EETC transactions may be impacted by the downgrade of United's IDR. Fitch will be reviewing United's EETC ratings in the coming weeks. DERIVATION SUMMARY United's 'B+' rating remains two notches above American and three notches below Delta. The rating differential is driven, in part, by Fitch's expectation that United's leverage metrics post-pandemic will remain favorable compared to American's, but still too high to support a rating in the 'BB' category. KEY ASSUMPTIONS -- Airline traffic (RPMs) remains 45% or more below 2019 levels in 2021, only fully recovering to 2019 levels by 2024. Domestic and leisure travel are likely to rebound more quickly. Fitch believes that leisure travel could be back to 2019 levels on a run rate basis some time in 2023; -- Fitch's models assume jet fuel prices of approximately $1.60/gallon in 2021, rising to $1.80/gallon in 2023. Actual jet fuel prices have risen above these levels in recent weeks, with spot prices hovering around $1.75. Into-plane prices, including taxes, are modestly higher. Incorporating higher fuel prices into Fitch's models would drive modestly lower margins and greater cash burn in 2021 and 2022, but Fitch believes that the impact by the end of the forecast period would be less minimal as demand normalizes and the airlines are able to raise ticket prices. -- Fitch expects revenue per available seat mile (RASM) for the industry to remain below 2019 levels through the forecast period driven by intense competition. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Increasing evidence of a sustainable recovery in air travel; -- Adjusted debt/EBITDAR trending towards 4x; -- FFO fixed-charge towards 2.5x; -- Neutral to positive sustained FCF. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Prolonged downturn in air traffic persisting through 2021; -- Adjusted debt/EBITDAR sustained above 5x; -- FFO fixed charge coverage sustained below 1.5x; -- EBITDAR margins deteriorating into the low double-digit range; -- Persistently negative or negligible FCF. BEST/WORST CASE RATING SCENARIO International scale credit 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 Solid Liquidity: Risks for United are mitigated by a solid liquidity balance. Fitch believes that, given a rebound in traffic in 2H21, United may be able to end the year with $17 billion in liquidity. The company raised roughly $27 billion in 2020 through a combination of debt, equity, and government grants, ending the year with $12.7 billion in available liquidity excluding $7 billion in available loans under the CARES Act. Fitch's models assume that United will draw on its CARES Act loan. Liquidity was bolstered in 1Q21 through United's $600 million subordinated EETC tranche issuance, and another $2.6 billion in funds received through the second round of the government's Payroll Support Program (PSP2). United is likely to receive a similar amount in the third round of payroll support that was included in President Biden's coronavirus relief package. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. UNITED SHORE: Fitch Rates Proposed $700MM Unsecured Debt 'B+' ------------------------------------------------------------- Fitch Ratings has assigned an expected rating of 'B+' to the proposed $700 million unsecured debt issuance by United Shore Financial Services, LLC (United Wholesale). Proceeds are expected to be used to for general corporate purposes. United Wholesale has a Long-Term Issuer Default Rating (IDR) of 'BB-'. The Rating Outlook is Stable. KEY RATING DRIVERS The expected rating on United Wholesale's senior unsecured debt is one notch below the Long-Term IDR, given its subordination to secured debt in the capital structure and a limited pool of unencumbered assets, which results in weaker relative recovery prospects in a stressed scenario. United Wholesale's ratings reflects its solid franchise, with leading market share in the wholesale U.S. residential mortgage segment, solid asset quality performance in the servicing portfolio, strong earnings generation, improving capitalization, sufficient earnings coverage of interest expenses, a sufficiently robust and integrated technology platform, and experienced management team with extensive industry background. The ratings are also supported by Fitch's expectation for increased funding flexibility following the execution of the planned senior unsecured note issuance. Rating constraints include the challenging economic backdrop, which Fitch believes may pressure asset quality over the medium term, continued reliance on secured short-term wholesale funding facilities, with relatively limited duration, the breach of financial covenants during the early part of the coronavirus pandemic, and elevated keyperson risk related to the CEO and president, Mat Ishbia, who, together with the Ishbia family, exercises significant control over the company as majority shareholders. Additionally, the company's exclusive focus on the wholesale mortgage channel acts as a rating constraint, as volumes may be dependent on the outlook for the channel if further market share gains are limited. United Wholesale's leverage (gross debt/tangible equity) amounted to 3.4x at Dec. 31, 2020, down materially from 8.5x at YE 2019 due to increased net income and growth in retained earnings. Pro forma for the unsecured note issuance, Fitch expects United Wholesale's leverage will increase to 3.7x. This falls within Fitch's 'bbb' category capitalization and leverage benchmark range of 3.0x-5.0x for balance sheet heavy finance and leasing companies with an 'a' category operating environment score. Fitch expects leverage to be maintained around 4.0x over the Outlook horizon, as occasional shareholder distributions should be sufficiently offset by the retention of strong earnings. Corporate tangible leverage, which excludes the balances under warehouse facilities from gross debt, was 0.5x at Dec. 31, 2020 and expected to be 0.8x pro forma for the new issuance, which is below the net debt incurrence covenant of 2.0x set forth under United Wholesale's senior unsecured notes. Fitch believes the cushion on this covenant provides sufficient operating flexibility. Consistent with other mortgage companies, United Wholesale remains reliant on the wholesale debt market to fund operations. Secured debt was 90% of total debt at YE 2020, comprised of warehouse facilities and secured bank lines of credit. Although United Wholesale's warehouse lenders are diverse, comprised of 15 global and regional banks, approximately 18.8% of its facilities were committed at YE 2020, which is below peers and finance and leasing companies. Fitch views the company's plans to convert 35%-40% of total warehouse capacity to committed facilities in the coming months as favorable. United Wholesale's funding tenor is also short-duration, with the majority of facilities maturing within one year, well above that of other non-bank financial institutions, which exposes United Wholesale to increased liquidity and refinancing risk. Fitch would view an extension of the firm's funding duration favorably. Should United Wholesale execute on the unsecured issuance of $1.0 billion, Fitch estimates that the percentage of unsecured debt/total debt would increase to 20.4%, as of YE 2020, which is within Fitch's 'bb' category benchmark range of 10%-40% for funding, liquidity and coverage, for balance sheet heavy finance and leasing companies with an 'a' category operating environment score. Fitch would view further increases in unsecured funding favorably, as it would increase unencumbered assets and enhance the firm's funding flexibility, particularly in times of stress. Fitch views United Wholesale's liquidity profile as strong given actions already taken to shore up liquidity in response to the pandemic, which would be further augmented by the expected unsecured issuance. As of YE 2020, United Wholesale had approximately $1.2 billion of unrestricted cash, which is expected to increase to $1.9 billion, pro forma for the unsecured issuance. The liquidity position would be further enhanced if United Wholesale is able to execute on its plans to increase its committed funding. The Stable Outlook reflects Fitch's expectation that United Wholesale will maintain sufficient liquidity to address potential increases in servicing advances due to consumer mortgage forbearance programs in the event of another wave of the pandemic. The Outlook also reflects expectations for relatively stable leverage following the issuance of the unsecured notes, strong and consistent earnings generation and execution on plans to increase the proportion of committed credit facilities to 35%-40%. RATING SENSITIVITIES If the expected rating assigned to the unsecured debt were converted to final rating, it would thereafter be sensitive to changes in the Long-Term IDR and would be expected to move in tandem. However, a material increase in unencumbered assets and/or an increase in the proportion of unsecured funding could result in a narrowing of the notching between United Wholesale's Long-Term IDR and the unsecured notes. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An inability to continue to increase the proportion of committed funding, or the inability to effectively manage elevated servicer advance levels stemming from an increase in forbearance by borrowers and the potential for higher delinquencies following the lapse of forbearance programs; -- Leverage sustained above 5.0x over the horizon, increased utilization of secured funding that constrains the company's funding flexibility, regulatory scrutiny resulting in United Wholesale incurring substantial fines that negatively impact its franchise or operating performance, or the departure of Ishbia, who has led the growth and direction of the company. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- An improvement in funding flexibility, including a continued extension of funding duration, additional increases in the proportion of committed facilities beyond the current plan, and/or an increase in unsecured debt and unencumbered assets; -- Demonstrated effectiveness of corporate governance policies, the maintenance of consistent operating performance, enhanced liquidity, and leverage maintained at or below 4.5x on a gross debt/tangible equity basis. ESG CONSIDERATIONS United Wholesale has an ESG Relevance Score of '4' for Governance Structure due to elevated key person risk related to its president and chief executive officer, Ishbia, who has led the growth and strategic direction of the company, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. United Shore also has an ESG Relevance Score of '4' for Customer Welfare — Fair Messaging, Privacy and Data Security, due to its exposure to compliance risks that include fair lending practices, debt collection practices and consumer data protection, which has a negative impact on the credit profile and is relevant to the rating in conjunction with other factors. Except for the matters discussed above, the highest level of ESG credit relevance is a score of '3'. This means 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. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond 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. UNITED WHOLESALE: Moody's Rates Planned $700M Unsecured Bond 'Ba3' ------------------------------------------------------------------ Moody's Investors Service has affirmed United Wholesale Mortgage, LLC's Ba3 corporate family rating and Ba3 long-term unsecured debt rating. In addition, Moody's has assigned a Ba3 rating to the company's planned $700 million senior unsecured bond offering maturing in 2029. The outlook remains stable. Assignments: Issuer: United Wholesale Mortgage, LLC Senior Unsecured Regular Bond/Debenture, Assigned Ba3 Affirmations: Issuer: United Wholesale Mortgage, LLC LT Corporate Family Rating, Affirmed Ba3 Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 Outlook Actions: Issuer: United Wholesale Mortgage, LLC Outlook, Remains Stable RATINGS RATIONALE The ratings reflect United Wholesale's strong franchise in the US mortgage market as the fourth-largest overall mortgage originator in 2020, and the largest wholesale broker originator for the last several years. The company's profitability was exceptionally strong in 2020 with net income to average assets (ROAA) of around 40% driven by record originations and strong gain-on-sale margins. While Moody's expects profitability to decline in 2021, particularly as gain-on-sale margins decline as industry capacity catches up to demand, Moody's expects profitability to remain strong. The company's capitalization is strong as indicated by its tangible common equity (TCE) to adjusted tangible assets (TMA, which excludes the Ginnie Mae loans eligible from repurchase from the capital ratio) of 21.5% as of December 31, 2020. The company has grown very rapidly over the last several years. The rapid growth is credit negative due to the associated operational risks, which may lead to stress on liquidity, management, controls and system resources. In addition, Moody's believes that sacrificing profitability or increasing operating risks to continue rapid growth or to defend current market share could further increase credit risks. United Wholesale's funding structure has continued to strengthen driven in large part with the recent issuance of unsecured debt. The unsecured bond issuance increases the company's liquidity and allows it to retain a higher percentage of its MSRs on balance sheet. By not fully encumbering the MSRs, company will have greater funding options, particularly during times of stress. Like most non-bank mortgage companies, the company primarily relies on short-term (mostly one-year maturities) repurchase facilities to finance new originations. On January 21, 2021, the company completed its merger with Gores Holding IV, a special purpose acquisition company. The Ishbia family continues to own more than 90% of the company and retain voting control. Moody's considers the public listing as a credit positive development because of the additional disclosure and market discipline associated with being a public company. The benefits of the public listing is somewhat offset by the pressure on management from the quarterly earnings and market share growth expectations of public investors. In addition, the Ishbia family, will continue to control the company as the company's principal stockholders. Finally, only three of the nine board members will be required to be independent directors, a credit negative with respect to corporate governance compared to a majority of independent directors. The Ba3 senior unsecured bond rating is based on United Wholesale's corporate family rating and the application of Moody's Loss Given Default (LGD) for Speculative-Grade Companies methodology and model, which incorporate their priority of claim and strength of asset coverage. The stable outlook reflects Moody's expectation that United Wholesale will maintain its strong franchise and strong profitability over the next 12-18 months and that TCE to TMA will remain around 20%. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The company's ratings could be upgraded if the company is able to continue to strengthen its franchise while maintaining 1) strong profitability such as net income to assets in excess of 5.0%, 2) strong capital position with its ratio of tangible common equity (TCE) to tangible managed assets (TMA) expected to remain around 20%, 3) modest financial flexibility by maintaining a secured debt to gross tangible assets ratio of less than 50%; and, 4) modest refinance risk on its warehouse facilitates with at least 35% of its warehouse lines being two year or longer facilities. The company's ratings could be downgraded if its financial profile or franchise position weaken. Negative ratings pressure may develop if United Wholesale's 1) profitability weakens with net income to assets falling below 3.5% for an extended period of time, 2) TCE to TMA ratio falls and is expected to remain below 17.5%, 3) the company increases its use of secured MSR funding facilities beyond current modest levels, 4) percentage of non-GSE and non-government loan origination volumes grow to more than 7.5% of its total originations without a commensurate increase in alternative liquidity sources, and capital to address the risker liquidity and asset quality profile that such an increase would entail, or 5) the committed warehouse facilities remain below 30% of the company's total warehouse capacity. In addition, negative ratings pressure may develop if operational or regulatory risks increase. The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. VERMILION ENERGY: Moody's Lowers CFR to B1 on Declined Production ----------------------------------------------------------------- Moody's Investors Service has downgraded Vermilion Energy Inc.'s corporate family rating to B1 from Ba3, its probability of default rating to B1-PD from Ba3-PD, and it's senior unsecured rating to B3 from B2. At the same time, Vermilion's outlook has been changed to stable from negative and its speculative grade liquidity rating has been upgraded to SGL-2 from SGL-3. "The downgrade reflects our expectation that Vermilion's production will continue to decline towards 70,000 boe/d (net of royalties) through 2022 driven by lower capital spending, and that the company's cost structure will grow over the same period" said Moody's analyst Jonathan Reid. "The change in outlook to stable reflects our expectation that Vermilion will generate free cash flow in 2021 and maintain good liquidity". Downgrades: Issuer: Vermilion Energy Inc. Corporate Family Rating, Downgraded to B1 from Ba3 Probability of Default Rating, Downgraded to B1-PD from Ba3-PD Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD6) from B2 (LGD6) Upgrades: Issuer: Vermilion Energy Inc. Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3 Outlook Actions: Issuer: Vermilion Energy Inc. Outlook, Changed To Stable From Negative RATINGS RATIONALE Vermilion (B1 CFR) is challenged by: 1) a decline in production towards 70,000 boe/d (net of royalties) through 2022 as a result of lower capital spending and a shift away from its core North American assets and towards more lucrative assets in Eastern and Central Europe and Australia; 2) increasing production costs that will partially offset the impact of improving commodity prices, which combined with declining production will result in lower funds from operation (FFO) generation in 2021 compared to historical levels (FFO of around C$500 expected in 2021 compared to over C$800 million in 2018 and 2019); and 3) regulatory pressure on oil and gas extraction throughout Europe where a material portion of the company's assets are located. The company is supported by: 1) exposure to international commodity prices for around one third of total production, which are typically higher than prices received at the company's North American assets; 2) a diversified portfolio of assets with low decline rates; and 3) good liquidity, supported by Moody's expectation that Vermilion will generate free cash flow in 2021 which it will use to reduce debt. The stable outlook reflects our view that Vermilion will generate free cash flow in 2021 which it will use to reduce debt and maintain credit metrics, and that it will maintain good liquidity. Vermilion has good liquidity (SGL-2), with sources of around C$750 million in 2021 and no mandatory uses of liquidity over the next 4 quarters. Sources are comprised of around C$7 million of cash on balance sheet as of December 31, 2020, about C$545 million available under its C$2.1 billion revolving credit facility which matures in May 2024, and expected free cash flow of around C$200 million. The company has no mandatory debt maturities over the next four quarters. Moody's expects Vermilion will remain in compliance with the three financial covenants under its revolving credit facility over the next four quarters. Alternate sources of liquidity, if needed, are good as the company could sell up to C$210 million worth of assets without needing consent from its banks. In accordance with Moody's Loss Given Default for Speculative-Grade Companies (LGD) Methodology, the senior unsecured notes are rated B3, two notches below the B1 CFR. This two notch difference from the CFR reflects the C$2.1 billion secured revolving credit facility that ranks above Vermilion's unsecured notes in its capital structure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Vermilion's ratings could be upgraded if it grew production beyond the levels currently expected (86,000 boe/d net of royalties in 2020 declining towards 70,000 through 2022), if retained cash flow (RCF)/debt approaches 35% (18% in 2020), and if its leveraged full-cycle ratio improves toward 1.5x (1.1x in 2020) while improving its cost structure. The ratings could be downgraded if production declines beyond the levels currently expected, if RCF/debt is sustained below 20%, if its leveraged full-cycle ratio is sustained below 1x with a worsening cost structure, or if its liquidity profile deteriorates. The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. Vermilion is a public Canadian independent exploration and production (E&P) company, headquartered in Calgary, Alberta, that operates a range of onshore and offshore light oil and natural gas assets. The company has significant operations in Canada, Europe, Australia and the US. VILLA TAPIA CORP: Unsecured Creditors to Get 100% in 60-Month Plan ------------------------------------------------------------------ Villa Tapia Citi Fresh Supermarket Corp filed a Fourth Amended Plan and a corresponding Disclosure Statement. The Plan is a 60-month Plan in which all creditors are paid 100% and all creditors begin receiving payments on the Effective Date of the Plan (with the exception of PM Esq., who on consent begins receiving payments on the 11th month of the Plan.) The Plan is an affordable Plan, as during the six-month period from September 2020 to February 2021, the Monthly Operating Reports show that the Debtor's average net cash flow with loan payments and non-recurring expenses added back in, is $5,992. All the monthly payments under the Plan are less than that amount: * Payments #1-13 are under $5,700. * Payments #14-36 are under $5,400. * Payments #37-43 are under $5,700. * Payments #44-48 are under $5,200. * Payments #49-59 are under $2,200. * The final payment is $3,186.58. The Payment Schedule is designed to pay off all creditors as quickly as possible while coordinating the payments with what is anticipated to be a significant increase in the Debtor's revenues over the course of the Plan. Class 5 is an impaired class consisting of nonpriority unsecured claims. Con Edison's unsecured debt ($14,259) will be paid in full in 48 monthly payments beginning on the Effective Date. The unsecured debt of National Grid ($1,014), Community Financial ($2,020) and ADT Security ($2,639) will be paid in full in 5 monthly payments beginning on the Effective Date. The unsecured debt of Manhattan Beer ($6,900) will be paid in full in 10 monthly payments beginning on the Effective Date. The unsecured nonpriority debt of the NYS T&F ($702.49) and the Internal Revenue Service ($1,717) will be combined with the priority debt of these taxing agencies as described above and paid in full in 36 monthly payments beginning on the Effective Date. A copy of the Fourth Amended Disclosure Statement dated March 26, 2021, is available at https://bit.ly/31DZfms About Villa Tapia Citi Fresh Supermarket Corp. Based in Brooklyn, N.Y., Villa Tapia Citi Fres Supermarket Corp. is a delicatessen located at 40 Nostrand Avenue, Brooklyn, NY11205. It fell behind on its debt obligations in mid-2019 after it lost its W.I.C. license, which enabled it to sell certain nutritional children's products to holders of W.I.C. (Women, Infants, and Children) food subsidy cards. The Company subsequently fell behind on its rent payments to landlord Nostrand Avenue Equities, and on its loan payments to Eastern Funding LLC, which held a secured first lien on all the Debtor's property, and to Resnick Supermarket Equipment Corporation and General Trading Company, both of whom held junior liens. Villa Tapia Citi Fresh Supermarket Corp. filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y. Case No. 20-40357) on Jan. 20, 2020, listing under $1 million in both assets and liabilities. Previously, Judge Elizabeth S. Stong oversaw the case, now the case is assigned to Judge Nancy Hershey Lord. Phillip Mahony, Esq., is the Debtor's bankruptcy counsel. The Debtor tapped Sgouras Law Firm, PLLC as its legal counsel for non-bankruptcy matters, and Marcum LLP as its accountant. VINE ENERGY: Fitch Assigns First-Time 'B(EXP)' LongTerm IDR ----------------------------------------------------------- Fitch Ratings has assigned a first-time Long-Term Issuer Default Rating (IDR) of 'B(EXP)' to Vine Energy Inc. and Vine Energy Holdings LLC (Vine). 'BB(EXP)'/'RR1' to Vine's new First Lien Reserve Based Loan (RBL), 'BB-(EXP)'/'RR2' to its second lien term loan and 'B(EXP)'/'RR4' to its proposed senior unsecured notes. The Rating Outlook is Stable. Vine's expected ratings reflect the closing of its IPO and new $350 million RBL facility, closing its proposed $950 million senior unsecured notes offering and applying proceeds to debt reduction that results in total debt of below $1.2 billion. Failure to execute on these transactions could result in the withdrawal of the expected ratings. The Ratings consider Vine's cost structure, Haynesville footprint, hedge coverage, FCF forecast and sub-2.5x debt/EBITDA profile. They are offset by a relatively small RBL borrowing base, less developed PDP inventory, and the need to demonstrate commitment to its outlined financial policy. KEY RATING DRIVERS Improved Capital Structure: In conjunction with the completion of Vine's IPO that provided approximately $324 million of net proceeds, Fitch expects the proposed $950 million senior unsecured notes offering and the application of proceeds to repaying existing Vine Oil & Gas and Brix Oil & Gas Holdings debt, with the exception of the $150 million second lien term loan maturing December 2025, to support a relatively low leverage capital structure for the 'B' rating category. Forecast Total Debt with Equity Credit/EBITDA at YE 2021 is approximately 2x and supported by a manageable expected maturity schedule with the new RBL maturing in December 2024, and the senior unsecured notes maturing in 2029. FCF Provides Liquidity Support: Vine's new RBL commitment is $350 million, with $32 million initially drawn and $25 million of letters of credit, equating to a favorable utilization rate below 20%. The absolute amount of the $350 million commitment is below the typical RBL commitment size of E&P producers with over 100Mboe/d production and a notable factor in Vine's total liquidity. Fitch forecasts Vine to generate positive FCF throughout the forecast on a capital spending program of $300 million to $350 million, providing internally generated funds in support of liquidity needs and providing for flat production. Significant Haynesville Footprint: Vine's 127,000 net surface acres are located entirely within the dry gas Haynesville Basin in Northwest Louisiana and focus on the Haynesville and Mid-Bossier plays and includes roughly 25 years of inventory, though its Proved Developed Producing (PDP) reserve base is relatively smaller than peers. The Haynesville Basin is advantageously located near the Gulf Coast and Henry Hub with well-developed takeaway capacity, supporting comparatively low approximately $0.30 differentials. Production pro-forma combined Vine and Brix produced an average of 892 MMcf/d (149boe/d equivalent) for YE 2020. Quick Well Paybacks: Vine's historical well results suggest high initial production levels that produce 45% of Estimated Ultimate Recovery in the first year providing relatively short payback periods of 9-16 months. As a dry gas producer, Vine's production costs of around $0.61/Mcf during 2020 are competitive among natural gas peers and in line with Haynesville peer Comstock. Vine's costs are also supported by favorable gathering infrastructure and well managed G&A costs. Proforma for the combined company at YE 2020, Vine's unhedged cash netback was $0.78 Mcfe. Planned Credit Friendly Policy: Vine expects to allocate positive FCF toward repayment of the $150 million second lien term loan and outstanding RBL borrowings in an effort to achieve credit-friendly target leverage of 1.0x-1.5x. Prior to achieving this leverage, a dividend is not expected. Fitch is looking for execution on this policy, demonstrating a shift from pre-IPO actions, which included a $30 million 2020 distribution to Blackstone from RBL proceeds and a Tax Receivable Agreement, which affects future cash flows after 2025 by sharing the benefit derived from tax attributes with the pre-IPO investors. Hedging Policy Reduces CF Volatility: Vine's hedging program is reflected in its second lien term loan terms, which require 70% of expected production hedged over 24 months and the terms of its new RBL that requires 80% of PDP volume hedged within the first 24 months and 70% of PDP volumes for a rolling 24 months thereafter. DERIVATION SUMMARY In terms of production, the combined Vine at YE 2020 averaged 892 MMcfe/d (0% liquids). This is below Haynesville comps Comstock (B/Positive) at 1,260 MMcfe/d (2% liquids), but above Aethon United BR LP (B/Stable) and in line with natural gas producer Encino (B/Negative), which operates in the Appalachian Basin at 919 MMcfe/d (2Q20; 30% liquids). Vine's F2021 leverage around 2x is generally consistent with Aethon's and below Comstock's near 3x. Encino has the highest liquids content of the noted gas producers at 30%, resulting in above-average unhedged realized pricing compared to Vine Oil & Gas' $1.74/Mcf and Brix's $1.78/Mcf in 2020. Vine's realizations are in line with Haynesville dry gas comp Comstock, which realized $1.87per Mcfe in 2020. 2020 cash netbacks were $0.78 Mcfe for the proforma combined Vine, in line with Comstock, which along with Vine, is a lower cost operator. Vine's strategy for a FCF-focused low growth model will require approximately $350 million capex during the next few years and $300 million longer term to maintain production. Fitch expects Vine to drill approximately 28 net wells in 2021, compared with Comstock who plans to spending $510 million-$550 million to drill 51 net wells. Comstock holds 5.6 Tcfe of Proved reserves compared to Vine's proforma 3.2 Tcfe of Proved reserves. KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that Vine Energy Holdings LLC would be reorganized as a going concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim and a 100% draw on the RBL facility. Going-Concern (GC) Approach The GC EBITDA assumption of $360 million reflects the stress case EBITDA in the latter years of Fitch's forecast, when commodity prices start to move towards mid-cycle conditions. An EV multiple of 3.0x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. The choice of this multiple considered the following factors: -- The historical bankruptcy case study exit multiples for peer companies ranged from 2.8x to 7.0x, with an average of 5.2x and a median of 5.4x; -- The multiple is below the approximate recovery EV multiples of Comstock (3.75x) and Aethon (3.5x) given the company's less de-risked Eastern Haynesville footprint and relatively smaller PDP position. Liquidation Approach The liquidation estimate reflects Fitch's view of the value of balance sheet assets that can be realized in sale or liquidation processes conducted during a bankruptcy or insolvency proceeding and distributed to creditors. In assigning the value for Vine's assets, Fitch considered its proforma $740 million PV10 value, $590 million proved developed reserves and comparable M&A transactions within the Haynesville Basin, including comparable multiples for production per flowing barrel, value per acre and value per drilling location. Under the waterfall allocation, the first lien RBL of $350 million has a 'RR1' recovery rating and is notched up three levels to 'BB'. The second lien term loan is assigned a 'RR2' and is notched up two levels to 'BB-'. The planned senior secured notes are notched in line with the IDR at 'B'/'RR4'. KEY ASSUMPTIONS -- Henry Hub prices of $2.75/Mcf in 2021, $2.45/Mcf in 2022, and $2.45/Mcf thereafter; -- Vine, Brix and Harvest combination modelled to occur on Jan. 1, 2021; -- Production growth in the low-to-mid single digits; -- Capex of approximately $350 million in 2021-2023, $300 million in 2024+ to maintain production; -- Positive FCF allocated toward repayment of the RBL and second lien term loan; -- Commencement of measured shareholder activity upon achievement of 1.0x-1.5x target. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Execution on credit-friendly financial policy focusing on deleveraging over distributions; -- Realization of production and capital efficiencies supporting successful shift to material positive FCF generation; -- Continued development, de-risking and establishment of operational momentum that results in material increase of PDP reserves and competitive unit costs; -- Mid-cycle total debt with equity credit/EBITDA or FFO adjusted leverage below 2.5x. Fitch does not expect to upgrade until Vine demonstrates a track record of realizing production and capital efficiencies, leading to positive FCF and economic production and reserves growth. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A change in terms of financial policy that is debt-holder unfriendly; -- Mid-cycle total debt with equity credit/EBITDA or FFO adjusted leverage above 3.0x; -- Loss of operational momentum trending production below 700MMcf/d or materially increasing production costs; -- Reduction in RBL borrowing base or other event materially weakening liquidity; -- A trend of negative FCF contributing to diminished liquidity. Following the closing of the $950 million senior unsecured offering and the application of proceeds retiring existing debt, the 'B(EXP)' IDR would be replaced with a 'B' IDR. BEST/WORST CASE RATING SCENARIO International scale credit 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 Cleaned Up Capital Structure: With $33 million cash proforma the business combination at YE 2020, $32 million drawn and $25 million of letters of credit on the new $350 million RBL at completion of the noted transaction, as well as the legacy $150 million second lien term loan and the planned $950 million senior unsecured issuance, Vine will have an initial $327 million in liquidity and approximately $1.13 billion in debt. Total debt with equity credit/operating EBITDA at YE 2021 is forecast to be approximately 2x. ESG Considerations Vine has a an ESG Relevance Score of '4' for Governance Structure due to board independence and effectiveness, reflecting that four of six expected directors at the IPO will be Blackstone appointed. The score also reflects ownership concentration due to Blackstone's over 50% holdings and subsequent ability to influence Vine's board and management. These factors have a negative impact on Vine's credit profile and are relevant to the rating in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. VINE ENERGY: Moody's Assigns First Time B2 Corp. Family Rating -------------------------------------------------------------- Moody's Investors Service assigned first time ratings to Vine Energy Holdings LLC (VEH), including a Corporate Family Rating of B2, Probability of Default Rating of B2-PD, and senior unsecured notes rating of B3. The Speculative Grade Liquidity rating is SGL-2. The rating outlook is stable. Moody's will withdraw all existing ratings of Vine Oil & Gas, LP (Vine) upon the close of the VEH debt issuance and the repayment of Vine's unsecured notes. VEH, a subsidiary of the publicly listed Vine Energy Inc. (VEI), consolidates three operating companies - Vine, Brix Oil & Gas Holdings LP (Brix) and Harvest Royalties Holding LP (Harvest), all previously fully owned by The Blackstone Group L.P. (Blackstone). Following the reorganization in March 2021, Blackstone retains management control over VEI and VEH and will use $324 million in net proceeds from the recently completed initial public offering of VEI, and the proceeds from the issuance of the proposed $950 million unsecured notes, to repay the outstanding unsecured notes and revolver borrowings at Vine and the Unitranche term loan at Brix. VEH has entered into a new $350 million senior secured reserves based revolving credit facility (RBL), that will support the liquidity position of the combined operations. Vine's legacy $150 million second lien term loan was novated to VEH, making VEH the sole borrower in the VEH corporate family. "The combination of Vine, Brix and Harvest's assets creates a producing company of larger scale and reduced financial leverage, while VEI's public listing offers additional source of growth funding and reduces group's reliance on borrowing," commented Sreedhar Kona, Moody's senior analyst. "Moody's expects VEH to maintain ample financial flexibility reflected in the stable outlook on its ratings. VEH will maintain its production, generate solid free cash flow and will have capacity to further reduce debt in the next two years". Assignments: Issuer: Vine Energy Holdings LLC Probability of Default Rating, Assigned B2-PD Speculative Grade Liquidity Rating, Assigned SGL-2 Corporate Family Rating, Assigned B2 Senior Unsecured Notes, Assigned B3 (LGD4) Outlook Actions: Issuer: Vine Energy Holdings LLC Outlook, Assigned Stable To be Withdrawn upon the repayment of Notes: Issuer: Vine Oil & Gas, LP Corporate Family Rating, Caa1 Probability of Default Rating, Caa1-PD Senior Unsecured Notes, Caa2 (LGD5) Outlook, Stable (to be withdrawn) RATINGS RATIONALE VEH's B2 CFR reflects its high debt leverage, albeit somewhat lower than Vine's prior leverage and the company's single basin concentration offset by its strong free cash flow generation, as well as good liquidity position. Moody's expects VEH's cash flow metrics to improve over the next twelve months, supported by its strong hedge book that provides substantial certainty of cash flow through 2021 and beyond, positioning the company for debt reduction. VEH's combined production and size of proved developed (PD) reserves are relatively modest compared to its rated peers, with additional risks associated with single basin concentration. VEI's public offering significantly improves VEH's growth prospects, as the company can avail itself to public equity as a source of funding to pursue growth without increasing its debt. VEH also benefits from its productive acreage in the Haynesville/ Mid-Bossier formations, efficient operations and its low finding and development costs contributing to solid capital efficiency. The stable outlook reflects Moody's expectation that the company will reduce debt through free cash flow generation, while maintaining size and scale, and improving cash margins through cost structure optimization. VEH's senior unsecured notes are rated B3, one notch below the B2 CFR, reflecting the notes' subordination to VEH's $350 million senior secured RBL facility and the $150 million second lien term loan, all of which benefit from a priority lien on the collateral. VEH's liquidity is good as reflected in its SGL-2 rating. Pro forma for the notes issuance, VEH will have $25 million of cash balance and approximately $58 million drawn on its $350 million senior secured RBL facility with maturity in December 2024. About 85% of VEH's expected production for 2021 is hedged at above $2.50 per MMBtu of Henry Hub natural gas price. VEH's hedge book extends to 2025. Moody's expects VEH to use its operating cash flow to meet its cash needs, including capital spending through 2021. Maintenance financial covenants include a maximum 3.25x total net leverage ratio (with maximum cash netting of $75 million) and minimum current ratio of 1x. Moody's expects the company to maintain compliance under its covenants through the next 12 months. All of the company's assets are pledged as collateral under the RBL and second lien term loan facility. The second lien term loan facility matures in 2025, but the company will have the financial flexibility to repay it ahead of schedule, in 2022 through free cash flow generation. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS VEH's ratings could be upgraded if the company generates consistent positive free cash flow while reducing debt and growing reserves to improve debt to proved developed reserves significantly, and maintaining a leveraged full cycle ratio above 1.5x. The company must also maintain good liquidity. Factors that could lead to a downgrade include deterioration of liquidity or higher leverage, with retained cash flow to debt below 20%, as a result of negative free cash flow generation or debt-funded acquisitions. Headquartered in Plano, Texas, Vine Energy Holdings LLC is a natural gas-focused private independent exploration and production company majority owned by Vine Energy Inc. (VEI). VEI is a publicly listed company formed in 2021 and majority owned by its private equity sponsor, The Blackstone Group L.P. The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. WESTERN DIGITAL: Fitch Affirms 'BB+' LT Issuer Default Rating ------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Issuer default rating for Western Digital Corp. (WD) at 'BB+'. Fitch has also affirmed the first-lien senior secured credit facilities ratings at 'BBB-'/'RR1' and senior unsecured notes ratings at 'BB+'/'RR4'. The Outlook is Stable. These ratings affect $11.5 billion of total debt, including the undrawn $2.25 billion revolving credit facility (RCF due Feb. 27, 2023. The ratings and Outlook reflect Fitch's expectation for improving intermediate-term operating performance, driven by higher flash prices, a richer sales mix and profit margins benefitting from process technology-driven cost savings. After two years of trough-level operating EBITDA, Fitch expects stronger average cash flow over the next three years despite higher capital spending, including at WD's flash manufacturing, Flash Ventures (FV), a joint venture (JV) with partner, Kioxia Corp. WD's suspension of its common dividend and commitment to using cash flow for debt reduction should enable the company to achieve its $6 billion nominal debt target and position WD for higher ratings in the intermediate term. WD's use of cash flow for debt reduction will better position the company to refinance its $5.8 billion of outstanding borrowings under the first-lien senior secured credit facilities, which expires in February 2023. KEY RATING DRIVERS Credit Positive Financial Policies: WD's suspension of its common dividend and use of FCF to reach its total debt target is credit positive, and Fitch believes could support higher ratings over the intermediate term. WD suspended share repurchases nine quarters ago, along with the dividend at the end of fiscal 2020. Debt reduction has exceeded FCF over the past six quarters. At this pace, Fitch forecasts WD should achieve the $6 billion debt target over the next two years, enabling it to maintain total debt/operating EBITDA below 2.5x through the cycle. Cyclical Memory ASPs: Fitch expects memory average selling prices (ASP) will remain highly cyclical, driven by production technology transitions and excess supply additions across a fragmented industry, limiting WD's control over profit margins. Given the significant operating leverage in the business, Fitch estimates operating EBITDA margins will range from the high-teens to low-20% over the forecast. Industry consolidation and the breakdown of Moore's Law should reduce the cost savings associated with transitioning to smaller geometries and moderate pricing cycles. SK Hynix's pending acquisition of Intel Corporation's memory business also reduces potential supply additions, pointing to more disciplined pricing. Significant Technology Risk: Technology for storage providers is significant and requires substantial investments in R&D and capex to keep pace with efficiencies. WD faces competition in NAND production from higher-rated peers with greater financial flexibility driving technological obsolescence risk, although FV enables WD to share in development and manufacturing costs with lower investment intensity than other peers. In addition, its disk drives business benefits from a duopolistic industry structure that enables WD to moderate bit-supply additions with demand. Breakdown of Moore's Law: The breakdown of Moore's Law should be supportive of WD's NAND business with lower cost benefits achieved by incremental process technology shrinks, slowing the pace of technology investment to maintain returns on investment across the industry. At the same time, Fitch believes slowing innovation poses two distinct risks to profit margins: The ASP-pressuring capacity additions intensify; and China accelerates closure of the still-substantial differential between its memory capabilities and those of non-Chinese players, including WD. Agnostic Storage Technology Portfolio: Fitch believes WD will benefit from an agnostic storage technology portfolio, which enables the company to supply storage solutions to both a wide range of performance and capacity storage workloads. WD's secure supply of NAND for SSD strengthens the company's products and solutions in high-performance markets where SSDs are cannibalizing HDDs, including personal computers and mission-critical enterprise drives. HDDs continue to benefit from lower total cost of ownership for certain applications such as capacity drives and surveillance products. FV Risks: Fitch believes the FV JV represents a contingent liability for WD given that FV supports WD's SSD business, representing roughly half of total revenue, through co-investing in innovation and providing NAND flash with favorable economics. The JV provides both WD and its partner the option but not obligation to fund capex at the JV. However, Fitch does not believe either partner could withhold investment on a sustained basis without impairing the JV's and WD's SSD competitiveness. DERIVATION SUMMARY WD is positioned in line with higher-rated direct peers, given the company's strong market positions, lower investment intensity and technology leadership by virtue of its JV structure. WD's focus on debt reduction with substantially all of its FCF positions the company to maintain total debt/operating EBITDA below 2.5x on average through the cycle. WD is in line with comparably rated Seagate with WD's SSD business providing greater diversification, faster average growth and higher average profit margins more than offsetting Seagate's lower investment intensity. While average pre-dividend FCF margins are roughly similar, Seagate's financial policies are more aggressive, with no leverage targets to balance a sizeable dividend and more recently intensified stock buybacks. WD is largely in line with higher-rated Micron Technology Inc. (BBB-/Stable), which competes with WD in NAND production. Micron is more deeply cyclical due to its focus on NAND and DRAM development and manufacturing, while WD's HDD business moderates some cyclicality, and the JV structure reduces investment intensity. At the same time, Micron's financial structure is meaningfully more conservative, having used windfall cash flow from record memory prices in 2017-2018 for permanent debt reduction. KEY ASSUMPTIONS -- Revenue grows by mid-single digits in fiscal 2022 as datacenter (DC) spending accelerates after a digestion phase. Revenue growth slows in fiscal 2023 and declines in fiscal 2024 as demand normalizes, representing a roughly flat CAGR in 2020-2024. -- Gross profit margins are 150bps higher in fiscal 2021 than in fiscal 2020 driven by the realization of process technology cost reductions amid relatively stable ASPs. Fiscals 2022-2023 should benefit from a richer sales mix, as energy-assisted capacity drives a higher percentage of growth. After peaking in the mid-20%, Fitch expects non-GAAP gross margins in the 20%-25% range. -- Assuming relatively flat operating expenses, Fitch forecasts operating EBITDA margins in the 15%-30% through the cycle but closer to the high-teens/low-20% through the forecast. -- Fitch expects cash capital spending of roughly $1 billion in the current fiscal year and 6% capital intensity thereafter. Fitch anticipates a reversal of cash received from FV in fiscal 2020. -- Dividend remains suspended until the company achieves its debt target, at which point Fitch expects WD will gradually reintroduce the dividend and focus on stock buybacks. -- WD will use FCF for debt reduction until it achieves its target debt level. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Average organic revenue growth in the low- to mid-single digits and operating EBITDA margins averaging in the mid-20s through a memory cycle. -- Expectations for total debt/operating EBITDA averaging below 2.5x through the cycle, or pre-dividend FCF to total debt above 15%. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Sustained negative organic revenue growth from weaker than expected capacity HDD growth. -- Slower than expected debt reduction and profitability erosion resulting in total debt to operating EBITDA sustained above 3.0x, or pre-dividend/total debt approaching 10%. BEST/WORST CASE RATING SCENARIO International scale credit 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 Solid liquidity: Fitch expects liquidity will remain adequate and, as of Dec. 31, 2021, was supported by $3.0 billion of cash and cash equivalents and an undrawn $2.25 billion secured RCF expiring Feb. 27, 2023. Fitch's expectation for $1 billion of annual FCF on average over the rating horizon also supports liquidity. WD faces the maturity of its first-lien senior secured credit facility in the spring of 2023, the majority of which Fitch expects the company to refinance. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means 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. [^] BOOK REVIEW: The Rise and Fall of the Conglomerate Kings ------------------------------------------------------------ Author: Robert Sobel Publisher: Beard Books Softcover: 240 pages List Price: $34.95 Review by David Henderson Order your personal copy today at http://is.gd/1GZnJk The marvelous thing about capitalism is that you, too, can be a Master of the Universe. If you are of a certain age, you will recall that is the name commandeered by Wall Street bond traders in their Glory Days. Being one is a lot like surfing: you have to catch the crest of the wave just right or you get slammed into the drink, and even the ride never lasts forever. There are no Endless Summers in the market. This book is the behind-the-scenes story of the financial wizards and bare-knuckled businessmen who created the conglomerates, the glamorous multi-form companies that marked the high noon of post-World War II American capitalism. Covering the period from the end of the war to 1983, the author explains why and how the conglomerate movement originated, how it mushroomed, and what caused its startling and rapid decline. Business historian Robert Sobel chronicles the rise and fall of the first Masters of the Universe in the U.S. and describes how the era gave rise to a cadre of imaginative, bold, and often ruthless entrepreneurs who took advantage of a buoyant stock market to create giant enterprises, often through the exchange of overvalued paper for real assets. He covers the likes of Royal Little (Textron), Text Thornton (Litton Industries), James Ling (Ling-Temco-Vought), Charles Bludhorn (Gulf & Western) and Harold Geneen (ITT). This is a good read to put the recent boom and bust in a better perspective. While these men had vastly different personalities and processes, they had a few things in common: ambition, the ability to seize opportunities that others were too risk-averse to take, willing bankers, and the expansive markets of the 1960s. There is something about an expansive market that attracts and creates Masters of the Universe. The Greek called it hubris. The author tells a good joke to illustrate the successes and failures of the period. It seems the young son of a Conglomerateur brings home a stray mongrel dog. His father asks, "How much do you think it's worth?" To which the boy replies, "At least $30,000." The father gently tries to explain the market for mongrel dogs, but the boy is undeterred and the next afternoon proudly announces that he has sold the dog for $50,000. The father is proudly flabbergasted, "You mean you found some fool with that much money who paid you for that dog?" "Not exactly," the son replies, "I traded it for two $25,000 cats." While it lasted, the conglomerate struggles were a great slugfest to watch: the heads of giant corporations battling each other for control of other corporations, and all of it free from the rubric of "synergy." Nobody could pretend there was any synergy between U.S. Steel and Marathon Oil. This was raw capitalist power at work, not a bunch of fluffy dot.commies pretending to defy market gravity. History repeats itself, endlessly, because so few people study history. The stagflation of the 1970s devalued the stock of conglomerates and made it useless a currency to keep the schemes afloat. The wave crashed and waiting on the horizon for the next big wave: the LBO Masters of the 1980s. Robert Sobel was born in 1931 and died in 1999. He was a prolific chronicler of American business life, writing or editing more than 50 books and hundreds of articles and corporate profiles. He was a professor of business history at Hofstra University for 43 years and he a Ph.D. from NYU. ********* 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. 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