U.S. entertainment production equipment and services provider NEP/NCP Holdco Inc. (NEP)'s elevated leverage has narrowed its margin of compliance, which we expect to fall below 10% over our two-year forecast horizon as its covenants continue to step down. The company's recent acquisitions and capital-intensive nature are constraining discretionary cash flow, potentially limiting its ability to meet unexpected business demands without accessing its revolving facility. We are affirming our 'B' corporate credit rating on NEP. The negative outlook reflects our expectation that NEP's covenant cushion will be about 10% by the end of 2016 and will remain below 15% through 2017. It also reflects our view that an unexpected increase in capital spending may further pressure liquidity and the already narrow
