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Investing.com -- S&P Global Ratings has revised the recovery rating on CES Energy Solutions Corp.’s C$200 million senior unsecured notes to ’4’ from ’3’ while affirming the ’B+’ issue-level rating following the company’s announced C$75 million add-on offering.
The revised recovery rating indicates S&P’s expectation for average recovery (30%-50%; rounded estimate:45%) to creditors in the event of a payment default, reflecting the additional fixed-rate debt in CES’s capital structure.
CES plans to use proceeds from the add-on to reduce outstanding borrowing under its revolving credit facility and for general corporate purposes. As of June 30, the company had C$179 million drawn on its C$550 million revolving credit facility, representing 32% utilization.
The rating applies to the company’s C$275 million senior unsecured notes due May 2029, which includes the C$75 million add-on.
S&P’s default scenario assumes a sustained period of weak crude oil and natural gas prices globally, leading to reduced drilling activity and lower demand for CES’s products.
The agency valued CES on a going-concern basis using a 5.5x multiple of projected emergence EBITDA of C$115 million, in line with standard assumptions for the oilfield services sector.
In its analysis, S&P estimated that administrative expenses would reduce the value available to creditors by 5%, and assumed the C$550 million cash flow revolver facility would be C$450 million drawn at hypothetical default in 2029.
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