Research Update: Tosca Services LLC Downgraded To 'B-' On Negative Free Cash Flow And Elevated Leverage; Outlook Negative

Tosca Services LLC's high capital expenditures (capex) are translating into consistently negative free operating cash flow (FOCF) and leverage remains elevated primarily due to increased costs. We expect S&P Global Ratings-adjusted leverage to improve over the next 12 months, but to remain elevated in the 6x-7x range in 2022, with further improvement in 2023. Therefore, we lowered our issuer credit rating on Tosca to 'B-' from 'B'. At the same time, we lowered our rating on the company's first-lien term loan to 'B-' from 'B'. The '3' recovery rating is unchanged, reflecting our expectation of meaningful recovery (50%-70%; rounded estimate: 50%) in the event of a default. The negative outlook reflects our expectation that Tosca's FOCF will continue to be

...- Tosca Services LLC's high capital expenditures (capex) are translating into consistently negative free operating cash flow (FOCF) and leverage remains elevated primarily due to increased costs. - We expect S&P Global Ratings-adjusted leverage to improve over the next 12 months, but to remain elevated in the 6x-7x range in 2022, with further improvement in 2023. - Therefore, we lowered our issuer credit rating on Tosca to 'B-' from 'B'. - At the same time, we lowered our rating on the company's first-lien term loan to 'B-' from 'B'. The '3' recovery rating is unchanged, reflecting our expectation of meaningful recovery (50%-70%; rounded estimate: 50%) in the event of a default. - The negative outlook reflects our expectation that Tosca's FOCF will continue to be negative, and that leverage will be elevated over the next 12 months....

Research Update