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Quote Book: Gleaning Sector Trends From Rating Actions For BSL CLO Market Participants (As Of Oct. 29, 2020)

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Quote Book: Gleaning Sector Trends From Rating Actions For BSL CLO Market Participants (As Of Oct. 29, 2020)

U.S. broadly syndicated collateralized loan obligations (CLOs) are backed primarily by broadly syndicated loans (BSLs) issued by U.S. companies. The CLO group within S&P Global Ratings' U.S. Structured Finance department believes that a review of the recent rating action reports published by U.S. Corporate Ratings can provide insights on developing sector trends. Accordingly, we have compiled a list of key quotes (lightly edited) from recently published Corporate Ratings reports on issuers with loans held in BSL CLOs (see table 1). We note that the quotes highlighted below are company specific and, therefore, may not apply to every issuer within a given sector. Nonetheless, it is our view that this "at-a-glance" snapshot view of the sector will add value to CLO market participants.

Table 1

Key Quotes
Rating
Issuer GIC sector To From Quotes from rating actions this past week

Alchemy International Holdings LLC

Metals and mining B-/Stable B/Stable "Furthermore, the industrial segments, which have been facing COVID-19 related plant shutdowns since the end of March 2020, were hard hit by the pandemic and we anticipate their turnaround will lag the general economic recovery." "We expect these end markets to continue to struggle for the balance of 2020 and believe the worst is still ahead for certain of the company's aerospace customers."

Sovos Brands Intermediate Inc.

Food products B/Stable B-/Stable "Although we expect the level of at-home food consumption to moderate over the coming quarters, we forecast that the demand for Sovos' products will remain strong as consumers continue to eat more meals at home." "While governments have eased their COVID-19 related stay-at-home orders over the past couple of months, there are still restrictions on in-restaurant dining in most regions and we believe many consumers remain hesitant to dine at restaurants because of fears around contracting the virus."

WP CPP Holdings LLC

Aerospace and defense CCC+/Negative B-/Negative "The International Air Transport Assn. has further pushed out its expected recovery for global air travel back to 2019 levels by one year to 2024." "Although some markets--such as China and parts of Europe and Asia--have recovered somewhat, others remain weak." "These include North America, where COVID-19 cases have risen." "Parts of Europe have also had a significant resurgence in cases, which could lead to new travel restrictions." "We expect domestic travel to recover more quickly than international..."

Diamond (BC) B.V.

Household products B-/Stable CCC+/Negative "The company experienced a sharp decline in demand in certain of its key end markets that were most affected by the coronavirus pandemic in the second quarter, such as hospitality, food service, and retail, but its demand has since modestly recovered." "In addition, the heightened demand for its sanitation and infection-prevention products has helped to offset a decline in its top-line revenue." "We expect the demand for these products to remain above average for at least the next 12 months."

SMG Holdings Inc.

Entertainment B-/Negative B/Negative "We believe that a recovery in live events could be reliant on a medical solution to COVID-19--either a vaccine or a treatment that would lessen consumer apprehensions around crowded public spaces." "We expect that attendance volumes could begin to recover in the second half 2021, likely following the release and broad distribution of a medical solution to COVID-19."

PetSmart Inc.

Specialty retail B/Stable B-/Positive "We expect long-term tailwinds to the sector given recent elevated pet adoption rates." "The economic backdrop remains fragile and while pet purchases are somewhat nondiscretionary (particularly consumables), we would expect the company's sales of hard goods and specialty merchandise, which have been strong sales categories for PetSmart through the pandemic, to moderate in a weaker consumer spending environment."

MHI Holdings LLC

Machinery B/Stable B+/Stable "Near-term defense spending should remain solid, but could come under pressure in the next few years due to the substantial amounts the government is spending to offset the economic impact of the pandemic." "The Department of Defense is accelerating payments and some additional costs related to the disruptions may be covered." "However, requests for new programs and awards on existing competitions may be delayed."

Anchor Glass Container Corp.

Containers and packaging CCC+/Negative SD "The coronavirus pandemic has accelerated some of the company's secular headwinds but has also introduced some tailwinds."  "The near collapse of on-premise drinking due to COVID-19 related shutdown orders has accelerated the conversion of beer bottles to aluminum cans."

Trader Corp.

Interactive media and services B/Negative B/Watch Neg "We believe that the spike in light-vehicles demand that dealers faced this summer, arguably reflecting pent-up demand from earlier closures, could decelerate over the remainder of the year and into early 2021." "In addition, consumer spending on big-ticket purchases such as personal vehicles could be affected as government income support measures start to eventually roll-off, and if employment growth stalls."

LABL Inc

Commercial services and supplies B-/Stable B/Negative "Although Multi-Color predominantly competes in recession-resistant markets, some parts of its business are more exposed to the effects of the COVID-19 pandemic than others. While its cleaning products, food, beverage, and other consumer staples markets are performing well, some of its other end markets, such as beer producers in Europe and Africa, small wineries globally, and U.K.-based distillers, have seen production cuts, which is reducing their demand for labels."

McAfee LLC

Software BB-/Stable B/Stable "McAfee continues to report strong growth in the highly profitable consumer security business...In spite of growing corporate spending on IT security, McAfee has struggled to generate bookings or revenue growth from enterprise security products. This segment has reported revenue declines in three of the past four years and we forecast it to decline in the mid-single-digit percent this year even as many enterprise security providers benefit from increasing spending to support secure remote work and cloud-based workloads."

Surgery Partners Inc.

Health care providers and services B-/Stable B-/Watch Neg "After reaching its trough in April, surgery volume has steadily recovered each month and now is near pre-COVID-19 levels…With better cash flow due to faster-than-anticipated recovery in patient volume; stimulus benefits."
BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification.

We are also including a table listing all rating actions on issuers with loans held in U.S. BSL CLOs that have taken place over the past two weeks. For each issuer, we include the rank as of the end of third quarter, to give an indication of how widely held the issuer's loans are across U.S. BSL CLOs rated by S&P Global Ratings. U.S. BSL CLOs, collectively, have had exposure to over 1,500 parent issuers operating across several different global industry classification (GIC) sectors. (For the list of top 250 issuers as of third-quarter 2020, see "The Most Widely Referenced Corporate Obligors In Rated U.S. BSL CLOs: Third-Quarter 2020," published Oct. 2, 2020.)

Table 2

Rating Actions Over Past Two Weeks
On corporate issuers with loans held in BSL CLOs
Rating
Action date Issuer GIC sector To From Action PR links Rank within U.S. BSL CLOs as of third-quarter 2020
10/12/2020

Alchemy International Holdings LLC

Metals and mining B-/Stable B/Stable Downgrade Link 1,078
10/12/2020

Liquidnet Holdings Inc.

Software BB-/Watch Pos BB-/Negative Placed on Watch Pos Link 1,068
10/13/2020

Mallinckrodt plc

Pharmaceuticals D CCC-/Watch Neg Downgrade Link 288
10/13/2020

TMK Hawk Parent Corp.

Trading companies and distributors CCC/Negative SD Upgrade Link 687
10/13/2020

Twin River Worldwide Holdings Inc.

Hotels, restaurants, and leisure B+/Negative B+/Watch Neg Affirmed; off Watch Neg Link 789
10/13/2020

Sovos Brands Intermediate Inc.

Food roducts B/Stable B-/Stable Upgrade Link 1,382
10/14/2020

Trader Corp.

Interactive media and services B/Negative B/Watch Neg Affirmed; off Watch Neg Link 827
10/14/2020

Capri Acquisitions Bidco

Professional services NR B-/Stable Withdrawal Link 622
10/14/2020

United Natural Foods Inc.

Food and staples retailing B/Positive B/Negative Affirmed Link 120
10/15/2020

Anchor Glass Container Corp.

Containers and packaging CCC+/Negative SD Upgrade Link 430
10/15/2020

Datto, Inc.

Communications equipment B/Watch Pos B/Negative Placed on Watch Pos Link 507
10/15/2020

HD Supply Inc.

Trading companies and distributors BB+/Stable BB+/Watch Neg Affirmed; off Watch Neg Link 714
10/15/2020

JBS USA Lux S.A.

Food products BB+/Stable BB/Stable Upgrade Link 204
10/15/2020

WP CPP Holdings LLC

Aerospace and defense CCC+/Negative B-/Negative Downgrade Link 245
10/15/2020

Wirepath LLC

Household durables B-/Stable B-/Negative Affirmed Link 1,109
10/16/2020

Diamond (BC) B.V.

Household products B-/Stable CCC+/Negative Upgrade Link 551
10/16/2020

Chief Power Finance LLC

Project power NR CC/Negative Withdrawal Link 996
10/16/2020

Cinemark Holdings Inc.

Entertainment B/Negative B+/Watch Neg Downgrade Link 1,165
10/12/2020

Nuvei Technologies Corp.

IT services B+/Stable B-/Stable Upgrade Link 820
10/19/2020

Central Security Group Inc

Commercial services and supplies SD CCC-/Negative Downgrade Link 1,048
10/19/2020

Alliance HealthCare Services

Health Care providers and services SD B-/Watch Neg Downgrade Link 839
10/19/2020

MHI Holdings LLC

Machinery B/Stable B+/Stable Downgrade Link 673
10/19/2020

SMG Holdings Inc.

Entertainment B-/Negative B/Negative Downgrade Link 433
10/20/2020

TNT Crane & Rigging LLC

Construction and engineering B-/Negative D Upgrade Link 1,258
10/20/2020

New Academy Holding Co. LLC

Specialty retail B/Positive B-/Developing Upgrade Link 461
10/20/2020

PetSmart Inc.

Specialty retail B/Stable B-/Positive Upgrade Link 178
10/21/2020

Navistar International Corp.

Machinery B/Watch Pos B/Watch Neg Placed on Watch Pos Link 203
10/21/2020

Metro-Goldwyn-Mayer Inc.

Entertainment B/Stable B+/Negative Downgrade Link 535
10/21/2020

LABL Inc.

Commercial services and supplies B-/Stable B/Negative Downgrade Link 460
10/21/2020

Curvature Inc.

IT services CCC/Watch Pos CCC/Negative Placed on Watch Pos Link 1,238
10/22/2020

Covenant Surgical Partners Inc.

Health care providers and services B-/Stable B-/Watch Neg Affirmed; off Watch Neg Link 961
10/22/2020

McAfee LLC

Software BB-/Stable B/Stable Upgrade Link 41
10/22/2020

Surgery Partners Inc.

Health care providers and services B-/Stable B-/Watch Neg Affirmed; off Watch Neg Link 537
10/22/2020

Tivity Health Inc.

Health care providers and services B/Watch Pos B/Watch Neg Placed on Watch Pos Link 618
10/23/2020

Datasite Global Corp.

IT services B/Watch Neg B/Stable Placed on Watch Neg Link 733
10/23/2020

Upstream

Health care providers and services B/Stable B/Watch Neg Affirmed; off Watch Neg Link 679
BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification.

This report does not constitute a rating action.

Primary Credit Analysts:Daniel Hu, FRM, New York (1) 212-438-2206;
daniel.hu@spglobal.com
Robert E Schulz, CFA, New York (1) 212-438-7808;
robert.schulz@spglobal.com
Secondary Contact:Bryan A Ayala, New York + 1 (212) 438 9012;
bryan.ayala@spglobal.com
CLO Sector Lead:Stephen A Anderberg, New York (1) 212-438-8991;
stephen.anderberg@spglobal.com
Analytical Manager, Leveraged Finance:Ramki Muthukrishnan, New York (1) 212-438-1384;
ramki.muthukrishnan@spglobal.com

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