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On December 14, 2020, Moody's Investors Service downgraded its corporate family rating on Harsco Corporation to Ba3 from Ba1, its probability of default rating to Ba3-PD from Ba1-PD, its Senior Secured 1st Lien Term Loan due 2024 rating to Ba2 from Baa3, its Senior Secured 1st Lien Delayed Draw Term Loan due 2024 rating to Ba2 from Baa3, its Senior Secured Revolving Credit Facility due 2024 rating to Ba2 from Baa3 and its Senior Unsecured Notes due 2027 rating to B1 from Ba2. "Harsco's operations and credit metrics have underperformed relative to our initial expectations and is the main driver of the downgrade," says Griselda Bisono, Moody's Vice President-Analyst. "The company's weak performance is further exacerbated by the debt-financed acquisition of Stericycle, Inc.'s Environmental Solutions Business (ESOL) in April 2020," adds Bisono. Harsco's rating is also constrained by expectation of declining, but still high leverage, with adjusted debt to EBITDA projected to be maintained above 4x through the end of 2022. The rating also incorporates cyclicality in the Harsco Environmental segment, where sales are largely driven by steel production volumes and can be impacted by prolonged slowdowns in steel mill production or excess production capacity.
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