Research Update: Reception Purchaser LLC Downgraded To 'B-' On Weak Operational Performance; Outlook Negative

We expect Reception Purchaser LLC's (doing business as STG) leverage will be above 8x in 2023 and 2024 as it faces headwinds from reduced container import volumes and a sharp decline in drayage and intermodal freight rates, stifling its profitability. As a result, we have lowered our issuer credit rating on STG to 'B-' from 'B'. We also lowered our issue-level rating on STG's first-lien term loan to 'B-' from 'B'. The '3' recovery rating is unchanged, indicating our expectation of meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a default. The negative outlook reflects our expectation that despite our forecast for slightly improving credit metrics in 2024, we believe continued negative free cash flow (FOCF) generation will

...- We expect Reception Purchaser LLC's (doing business as STG) leverage will be above 8x in 2023 and 2024 as it faces headwinds from reduced container import volumes and a sharp decline in drayage and intermodal freight rates, stifling its profitability. - As a result, we have lowered our issuer credit rating on STG to 'B-' from 'B'. - We also lowered our issue-level rating on STG's first-lien term loan to 'B-' from 'B'. The '3' recovery rating is unchanged, indicating our expectation of meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a default. - The negative outlook reflects our expectation that despite our forecast for slightly improving credit metrics in 2024, we believe continued negative free cash flow (FOCF) generation will limit STG's liquidity as it utilizes its cash on hand and revolving credit facility (RCF) to fund its losses....

Research Update