Research Update: Covia Holdings Corp. Downgraded To 'BB-' On Lower Realized Prices For Frac Sand Due To Softening Demand, Outlook Stable

We expect that U.S.-based frac sand and industrial minerals producer Covia Holdings Corp.'s average realization for frac sand will fall by about 25% for 2019. The company has been facing softening demand for frac sand since the second half of 2018, as a result of an oversupplied market. Therefore, we are lowering our issuer credit rating on Covia to 'BB-' from 'BB' due to our expectation for a weaker performance in its energy segment, despite the more steady results from its industrial business, and our assumption of some level of support from its majority owner, SCR-Sibelco N.V. At the same time, we are lowering our issue-level rating on Covia's $1.65 billion senior secured term loan to 'BB-' from 'BB'. The

...- We expect that U.S.-based frac sand and industrial minerals producer Covia Holdings Corp.'s average realization for frac sand will fall by about 25% for 2019. - The company has been facing softening demand for frac sand since the second half of 2018, as a result of an oversupplied market. - Therefore, we are lowering our issuer credit rating on Covia to '##-' from '##' due to our expectation for a weaker performance in its energy segment, despite the more steady results from its industrial business, and our assumption of some level of support from its majority owner, SCR-Sibelco N.V. - At the same time, we are lowering our issue-level rating on Covia's $1.65 billion senior secured term loan to '##-' from '##'. The '3' recovery rating remains unchanged. - The stable outlook reflects our expectation that Sibelco's adjusted leverage will decline from the middle to the bottom of the 2x¡3x range over the next year, supported by its non-energy businesses, and mandatory amortization requirements...

Research Update