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 | ||||||
| Diamond Sports Group LLC | Media | BB-/Watch Neg | BB-/Negative | "While its three major sports leagues (i.e., MLB, NHL, and NBA) managed to complete shortened 2020 seasons, all three face an uncertain schedule in 2021 and could face additional cancellations and delays. In addition, overall pay-TV video subscriber continues to trend downward, which we believe will hurt regional sports networks more than other TV networks." | ||||||
| Fetch Holdco LLC | Household products | B-/Stable | B-/Negative | "Pet adoption increased meaningfully after the virus outbreak and implementation of shelter-in-place orders." "We view e-commerce capabilities as critical to the long-term viability of industry competitors." "However, the company is also vulnerable to the fast-changing environment and will likely face more intense competition in the channel from smaller players, given it is easier for upstart brands to reach consumers online." | ||||||
| Par Petroleum LLC | Oil, gas, and consumable fuels | B/Negative | B+/Stable | "While its utilization has been gradually improving from the April lows, the recovery in the demand for travel and jet fuel remains muted, which indicates that crack spreads could stay below mid-cycle levels for longer than we previously forecast. We expect a gradual recovery in the refining sector beginning in the second half of 2021 as the effects of the pandemic subside, though our level of uncertainty remains high." | ||||||
| Vantage Specialty Chemicals Inc. | Chemicals | CCC+/Negative | B-/Negative | "Following a lackluster 2019 when weather interruptions, softened personal care demand, and customer inventory rationalizations hurt Vantage's earnings, the company has seen its high-end personal care business and industrial end markets impaired by the economic shutdowns related to COVID-19." | ||||||
| Alliance HealthCare Services | Health care providers and services | CCC+/Stable | SD | "Diagnostic imaging is a slow-expanding, mature industry. We anticipate continued reimbursement pressures along with the ongoing shift away from hospital-based services. Large third-party commercial payers have increasingly directed patients to lower-cost, free-standing outpatient diagnostic imaging facilities." | ||||||
| Realogy Group LLC | Real estate management and development | B+/Stable | B/Negative | "The U.S. real estate market rebound was faster than anticipated as low-rate financing and strong consumer demand drove home sales volumes and prices up, though the sustainability of these trends remains uncertain heading into 2021." "Stagnating, high unemployment and concerns around job security pose key risks as home prices continue to appreciate causing affordability to remain a concern, particularly as the financial disparity between high-income and low-income households continues to intensify." | ||||||
| Atkins Nutritionals Holdings II Inc. | Food products | B+/Stable | B+/Negative | "COVID-19 shopping patterns could continue to pressure operating performance and we believe the largest risk to our forecast is a continued rise in COVID-19 cases and increased restrictions. Stay-at-home orders and store closures have led to changes in consumer buying patterns, which reduced demand for on-the-go products such as bars and RTD shakes. Consumers are purchasing staples to create meals at home because that is where most meal consumption is taking place..." "In addition, consumers are going into retail locations with specific items in mind and are being more efficient as they go through the store to decrease their exposure to others." | ||||||
| Bass Pro Group LLC | Specialty retail | B+/Stable | B/Negative | "The company saw strong demand for its products amid the COVID-19 pandemic as consumers shifted their purchases toward gear for socially distanced entertainment options and hobbies." "This includes higher consumer spending on outdoor products, sporting goods, and firearms this year. However, we expect these product categories to experience lower demand levels in 2021." | ||||||
| Carnival Corp. | Hotels, restaurants, and leisure | B/Negative | BB-/Watch Neg | "Further, following an increase in coronavirus cases in Germany and subsequent tightening of restrictions in that country, AIDA announced a further pause in its operations for the month of November. We believe this illustrates that cruise operators will continue to face heightened risks of additional suspensions even once they are allowed to resume operations in the absence of a widely available vaccine or effective treatment, which could be around mid-calendar-year 2021 under our base case assumptions." | ||||||
| The Goodyear Tire and Rubber Co. | Auto components | B+/Negative | B+/Watch NEG | "...global tire volumes improved." "As government lockdowns were lifted, economic activity rose and miles driven improved around the world." "We think recent price moves by major tire makers will help the industry continue to recover past increases in raw material costs." | ||||||
| Screenvision LLC | Entertainment | CCC+/Negative | B/Negative | "The coronavirus pandemic will continue to affect theater attendance and consumer behavior well into 2021. We anticipate U.S. cinema attendance will not begin to recover until 2021, which is later than we previously expected. This is due to the ongoing pandemic, the continued delays of film releases by major studios, and the risk that global authorities may impose stricter lockdown measures to limit local resurgences of the virus." | ||||||
| Corsair Group (Cayman) L.P. | Technology hardware, storage, and peripherals | B+/Stable | B/Stable | "Overall, industry trends remain robust (demonstrated by stronger competitor guidance), and we believe that the upcoming console launches should provide strong momentum for Corsair going into the back half of 2020. That said, this will likely lead to tougher year-over-year comps, and we remain cautious heading into 2021. Moreover, there could be another economic downturn due to a second COVID-19 wave, which could reduce consumer spending for a prolonged period and lead to weaker-than-expected performance." | ||||||
| GIC--Global industry classification. MLB--Major League Baseball. NBA--National Basketball Assoc. NHL--National Hockey League. | ||||||||||
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 | |||||||||
| 10/28/2020 | Diamond Sports Group LLC | Media | BB-/Watch Neg | BB-/Negative | Placed on Watch Neg | Link | 8 | |||||||||
| 10/28/2020 | Fetch Holdco LLC | Household products | B-/Stable | B-/Negative | Affirmed | Link | 1,443 | |||||||||
| 10/28/2020 | LABL Inc | Commercial services and supplies | B/Negative | B-/Stable | Upgrade | Link | 460 | |||||||||
| 10/29/2020 | Catalent Inc. | Life sciences tools and services | BB/Stable | BB-/Stable | Upgrade | Link | 957 | |||||||||
| 10/29/2020 | Leslie's Poolmart Inc. | Specialty retail | B/Watch Pos | B/Stable | Placed on Watch Pos | Link | 516 | |||||||||
| 10/29/2020 | Topgolf International Inc. | Leisure products | CCC+/Watch Pos | CCC+/Negative | Placed on Watch Pos | Link | 684 | |||||||||
| 10/30/2020 | Advantage Sales and Marketing Inc. | Media | B/Stable | CCC+/Watch Pos | Upgrade | Link | 141 | |||||||||
| 10/30/2020 | Moda Ingleside Energy Center LLC | Oil, gas, and consumable fuels | BB/Stable | BB-/Stable | Upgrade | Link | 836 | |||||||||
| 11/2/2020 | IRB Holding Corp. | Hotels, restaurants, and leisure | B/Watch Pos | B/Negative | Placed on Watch Pos | Link | 56 | |||||||||
| 11/2/2020 | Par Petroleum LLC | Oil, gas, and consumable fuels | B/Negative | B+/Stable | Downgrade | Link | 1,364 | |||||||||
| 11/2/2020 | TortoiseEcofin Borrower LLC | Capital markets | CCC+/Stable | B/Negative | Downgrade | Link | 909 | |||||||||
| 11/2/2020 | Vantage Specialty Chemicals Inc. | Chemicals | CCC+/Negative | B-/Negative | Downgrade | Link | 358 | |||||||||
| 11/3/2020 | Alliance HealthCare Services | Health care providers and services | CCC+/Stable | SD | Upgrade | Link | 839 | |||||||||
| 11/4/2020 | FTS International Inc. | Energy equipment and services | NR | D | Withdrawal | Link | 1,220 | |||||||||
| 11/4/2020 | Corsair Group (Cayman) L.P. | Technology hardware, storage, and peripherals | B+/Stable | B/Stable | Upgrade | Link | 913 | |||||||||
| 11/4/2020 | National CineMedia LLC | Media | CCC+/Negative | B/Negative | Downgrade | Link | 815 | |||||||||
| 11/4/2020 | Realogy Group LLC | Real estate management and development | B+/Stable | B/Negative | Upgrade | Link | 191 | |||||||||
| 11/4/2020 | Screenvision LLC | Entertainment | CCC+/Negative | B/Negative | Downgrade | Link | 1,324 | |||||||||
| 11/5/2020 | Atkins Nutritionals Holdings II Inc. | Food products | B+/Stable | B+/Negative | Affirmed | Link | 608 | |||||||||
| 11/5/2020 | Bass Pro Group LLC | Specialty retail | B+/Stable | B/Negative | Upgrade | Link | 27 | |||||||||
| 11/5/2020 | Carnival Corp. | Hotels, restaurants, and leisure | B/Negative | BB-/Watch Neg | Downgrade | Link | 457 | |||||||||
| 11/5/2020 | Gateway Casinos and Entertainment Ltd. | Hotels, restaurants, and leisure | CCC+/Negative | CCC+/Watch Neg | Affirmed; off Watch Neg | Link | 844 | |||||||||
| 11/6/2020 | CDRH Parent Inc. | Health care providers and services | SD | CCC-/Negative | Downgrade | Link | 1,153 | |||||||||
| 11/6/2020 | PetSmart Inc. | Specialty retail | B-/Positive | B/Stable | Downgrade | Link | 178 | |||||||||
| 11/6/2020 | The Goodyear Tire and Rubber Co. | Auto components | B+/Negative | B+/Watch NEG | Affirmed | Link | 1,206 | |||||||||
| BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification. NR--Not rated. SD--Selective default. PR--Press release. | ||||||||||||||||
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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