In its first financing announcement since rumours of a pending initial public offering swirled this summer, Tervita Corp. is issuing $290-million (U.S.) of senior unsecured notes.
The kicker: they're rated CCC+ by Standard & Poor's.
In a report explaining its rating, S&P noted "high debt leverage due to management's aggressive financial policy" as well as the firm's "participation in the competitive and cyclical oilfield services market, and lack of long-term contracts." As of June 30, Tervita's senior secured debt was 4.5 time its earnings before interest, taxes, depreciation and amortization.
S&P's overall corporate credit rating for Tervita is B-.
Tervita, formerly CCS Corp., will use most of the proceeds to repay revolving credit facilities. This is the first time the firm has tapped debt markets since it attempted to raise $675-million in the summer of 2011 to repurchase bonds with 11 per cent coupons. That financing ultimately got shelved because of adverse market conditions.
In January, Tervita took out a $200-million incremental term loan under its existing facilities to repay its revolver.
In its own review, Moody's said it expects Tervita to have negative free cash flow of $40-million through the third quarter of 2013. The firm also needs to refinance its $1.5-billion term loan by November 2014.
CCS was taken private in a contentious $3.5-billion buyout in 2007, led by founder David Werklund. Typically, private investors like to cash in on their investments around the five-year mark.