Tensar Corp. was downgraded today by S&P Global Ratings to CCC, with a negative outlook, from B- and CreditWatch Negative, on concerns about an upcoming first-lien term loan refinancing in 2021. The company's senior secured debt was lowered as well, with the first-lien term loan cut to CCC+, from B, and its second-lien term loan cut to CCC-, from CCC+.
Ratings expressed specific concern about the company's $212 million outstanding first-lien term loan due in July 2021. An asset-based loan with $10 million outstanding also comes due within the next 12 months. The company's $78 million outstanding second-lien term loan matures in July 2022.
Ratings said that although it believes the company's results and infrastructure end markets have "largely been insulated from recessionary conditions to date," uncertainty regarding infrastructure spending in 2021 because of reduced state tax receipt collections in many states raises the risks that the company faces in refinancing its first-lien debt. Adding to the company's refinancing issues is "potentially challenging capital market conditions" because of the pandemic.
Ratings believes it is "unlikely" that Tensar would resort to a distressed exchange or discount repurchase of its debt, given the company's improved operating performance. But on the flip side, the pace of its projects has slowed because of labor shortages, while "general uncertainties" have led to some project delays. Also bearing watching is the company's margins, which are subject to raw material cost volatility, particularly its resins and diesel fuel.
Tensar produces durable polymer grid products used in earthwork construction applications. It is owned by private equity firm Castle Harlan.