articles Ratings /ratings/en/research/articles/210121-quote-book-gleaning-sector-trends-from-rating-actions-for-bsl-clo-market-participants-as-of-jan-15-2021-11810104 content esgSubNav
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

In This List
COMMENTS

Quote Book: Gleaning Sector Trends From Rating Actions For BSL CLO Market Participants (As Of Jan. 15, 2021)

COMMENTS

Credit FAQ: How The New Qualified Mortgage Rule Could Impact U.S. RMBS

COMMENTS

Scenario Analysis: How Resilient Are Middle-Market CLO Ratings?

ABS Auto Loan Extensions Related to Covid-19 - December 2020 Update

COMMENTS

Latin America Structured Finance Outlook 2021: New Issuance Should Increase Amid The Challenging Environment


Quote Book: Gleaning Sector Trends From Rating Actions For BSL CLO Market Participants (As Of Jan. 15, 2021)

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 the U.S. Corporate Ratings group 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 GICS sector To From Quotes from rating actions this past week

Acadia Healthcare Co. Inc.

Health care providers and services B/Watch Pos B/Stable "Despite the escalation in COVID-19 cases, we don't expect significantly reduced volume for Acadia's services, and we expect volume to benefit from the anticipated easing of the pandemic over the next year. We expect only some disruptions in volumes in the near term from traditional referral sources, such as emergency rooms and medical professionals, as well as travel restrictions and stay-at-home orders. We expect the pace of growth, notwithstanding near-term disruption from the pandemic, to exceed our expectation of low-single-digit percentage organic growth for health care providers."

Sungard AS New Holdings, LLC

IT services CCC+/Stable SD "We acknowledge that revenue declines have moderated somewhat in 2020 due to successful efforts to improve client retention, though the company has significant exposure to legacy disaster recovery services such as shared infrastructure and commoditized colocation, which are in structural decline. The company has a good market position in these areas, though we expect ongoing competitive pressures from insourced or do-it-yourself disaster recovery and public cloud infrastructure that reduce the need for legacy services. While the company's strategic partnerships to develop hybrid and multicloud and network managed services could help improve client retention and revenue growth over time, contributions from these newer offerings are minimal because they were recently introduced."

Urban One, Inc.

Media B-/Stable CCC/Negative "TV One, Urban One's basic cable network, outperformed our expectations in 2020 due to high demand from advertisers targeting the African American demographic. Public support for the Black Lives Matter movement and social justice reform motivated companies to demonstrate their commitment to diversity and inclusion initiatives in 2020. We believe this benefitted TV One's advertising revenue because advertisers increasingly sought to reach its primarily African American audience. We expect that social and racial inequity will remain key themes in corporate marketing strategies over the next few years and anticipate the demand for TV One's audience could help offset some of the structural pressures facing the cable TV industry. Urban One's radio and TV segments both face structural pressures from digital disruption. Like other radio broadcasters, we view Urban One's radio segment as subject to long-term secular declines because advertisers are migrating to alternative media platforms (primarily online and, to a lesser extent, television), which will render it unable to materially raise its advertising rates to offset the listenership declines."

Mohegan Tribal Gaming Authority

Hotels, restaurants, and leisure CCC+/Watch Pos CCC+/Negative "We forecast that MTGA's consolidated lease-adjusted net leverage will remain above 13x in 2021 largely due to incremental debt to fund Project Inspire-related capital expenditure and partly because of weaker-than-normal visitation until the COVID-19 vaccines are widely distributed, which we believe could occur by mid-year. Additionally, we expect many of MTGA's lower-margin or loss-leading amenities, such as buffets, to remain closed for some time to comply with health and safety measures intended to limit the spread of the coronavirus, which will further support an improvement in its margin."

Macquarie Infrastructure Corp.

Transportation infrastructure B+/Stable BB/Watch Neg "The sale of IMTT Holdings LLC (IMTT) reduces MIC's scale and diversity, affecting our assessment of business risk. It leaves MIC with a greater exposure to cyclical end markets highly sensitive to travel demand. Atlantic Aviation and Hawaii Gas were acutely affected by the decline in economic and travel activity in 2020. Following sharp declines in general aviation activity at the airports where it operates in April 2020 (of about 80% year-on-year), Atlantic Aviation benefited from an industrywide rebound in private air travel, and general aviation activity at the airports where Atlantic operates recovered to roughly 80% of prior-year levels by third-quarter 2020 as clients likely sought private aviation to avoid more densely populated commercial air travel. However, we expect Atlantic Aviation's full recovery will be challenged by the more moderate pace of the rebound in corporate air travel, to which the company's exposure is modestly skewed, relative to leisure travel."

Checkers Holdings Inc.

Hotels, restaurants, and leisure CCC/Negative SD "In our view, the improvement in performance has largely been due to the shift in consumer away-from-home food spending toward QSRs and away from casual dining amid the pandemic because these restaurants allow them to social distance and offer good value for money. In particular, we believe that the company has benefited because of its focus on lower menu prices and restaurant formats that do not feature any in-store dining (only drive-thru and a walk-up window). We do not anticipate that the company will be able to sustain its recent sales trends through fiscal year 2021 and forecast flat to slightly negative same-store sales as the coronavirus vaccines are widely distributed and consumers return to more-normalized purchasing habits."

Spencer Spirit IH LLC

Food and staples retailing B+/Stable B/Negative "We attribute the strong performance to consumers' increased desire to escape the woes of the pandemic, as well as a favorable competitive environment where other retailers anticipated weak demand and pulled back heavily on Halloween merchandise. In addition, we believe demand was elevated in 2020 due to Halloween falling on a Saturday, which typically results in higher spending. In 2021, a successful rollout of the COVID-19 vaccine may fuel more Halloween celebrations and provide positive momentum to Spirit's performance. However, we anticipate a more normalized competitive landscape and less favorable timing of Halloween over the next few years to result in decreasing sales and profitability."
GICS--Global Industry Classification Standard. QSR--Quick service restaurant. CRO--Contract research organization. SD--Selective default.

We are also including a list of all rating actions taken on issuers with loans held in U.S. BSL CLOs over the past two weeks (see table 2). For each issuer, we include the rank as of fourth-quarter 2020 to give an indication of how widely held the issuer's loans are across the U.S. BSL CLOs rated by S&P Global Ratings. Collectively, U.S. BSL CLOs 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 fourth-quarter 2020, see "The Most Widely Referenced Corporate Obligors In Rated U.S. BSL CLOs: Fourth-Quarter 2020," published Jan. 7, 2021.

Table 2

Rating Actions Over Past Two Weeks
On corporate issuers with loans held in BSL CLOs
Rating
Rating action date Issuer GICS sector To From Rating action PR Rank within U.S. BSL CLOs As of third-quarter 2020
1/5/2021

Acadia Healthcare Co. Inc.

Health care providers and services B/Watch Pos B/Stable Placed on Watch Pos Link 787
1/5/2021

HGIM Corp.

Marine SD CC/Negative Downgrade Link 1,153
1/6/2021

Ortho-Clinical Diagnostics Bermuda Co. Ltd.

Health care equipment and supplies B-/Watch Pos B-/Stable Placed on Watch Pos Link 100
1/7/2021

Change Healthcare Holdings LLC

Health care technology B+/Watch Pos B+/Stable Placed on Watch Pos Link 31
1/7/2021

Sungard AS New Holdings LLC

IT services CCC+/Stable SD Upgrade Link 1,148
1/7/2021

Urban One, Inc.

Media B-/Stable CCC/Negative Upgrade Link 762
1/8/2021

Checkers Holdings Inc.

Hotels, restaurants, and leisure SD CCC/Negative Downgrade Link 1,322
1/8/2021

Riverbed Technology Inc.

Software SD CC/Negative Downgrade Link 354
1/12/2021

INEOS Enterprises Holdings Ltd.

Chemicals BB/Negative BB/Watch Neg Affirmed; off Watch Neg Link 833
1/13/2021

CP Atlas Buyer Inc.

Building products B-/Stable B/Negative Downgrade Link 561
1/13/2021

GTT Communications Inc.

Diversified telecommunication services CCC/Negative CCC/Watch Neg Affirmed; off Watch Neg Link 113
1/13/2021

Mohegan Tribal Gaming Authority

Hotels, restaurants, and leisure CCC+/Watch Pos CCC+/Negative Placed on Watch Pos Link 280
1/13/2021

Macquarie Infrastructure Corp.

Transportation infrastructure B+/Stable BB/Watch Neg Downgrade Link 228
1/14/2021

HGIM Corp.

Marine CCC+/Negative SD Upgrade Link 1,153
1/15/2021

Checkers Holdings Inc.

Hotels, restaurants, and leisure CCC/Negative SD Upgrade Link 1,322
1/15/2021

Spencer Spirit IH LLC

Food and staples retailing B+/Stable B/Negative Upgrade Link 965
SD--Selective default.

The chart below shows a comparison of upgrades and downgrades listed in our previous Quote Book updates (this is not meant to be indicative of broader upgrade and downgrade trends).

image

The authors would like to thank Vijesh MV and Ashish Indapure for their contribution to this report.

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

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back