Research Update: Tosca Services LLC Downgraded To 'CC' From 'CCC+' On Announced Debt Exchange; Outlook Negative

On Aug. 14, 2024, Tosca Services announced a new $100 million super priority first-out first-lien term loan due Nov. 2028. The company intends to use the proceeds to pay down a portion of its recently upsized asset-based lending (ABL) revolving credit facility (not rated). In addition, Tosca plans to offer its lenders the option to exchange its existing $605 million first-lien term loan for a $605 million super-priority second-out term loan with an increased interest rate and pay-in-kind (PIK) feature. The super-priority term loans will mature in Nov. 2028. Under the proposed terms of the transaction, we view the exchange as distressed and tantamount to a default because the existing capital structure is unsustainable, in our view, evidenced by the

...- On Aug. 14, 2024, Tosca Services announced a new $100 million super priority first-out first-lien term loan due Nov. 2028. The company intends to use the proceeds to pay down a portion of its recently upsized asset-based lending (ABL) revolving credit facility (not rated). - In addition, Tosca plans to offer its lenders the option to exchange its existing $605 million first-lien term loan for a $605 million super-priority second-out term loan with an increased interest rate and pay-in-kind (PIK) feature. The super-priority term loans will mature in Nov. 2028. - Under the proposed terms of the transaction, we view the exchange as distressed and tantamount to a default because the existing capital structure is unsustainable, in our view, evidenced by the persistent free operating cash flow (FOCF) deficit. - The negative outlook reflects our intent to lower our issuer credit rating on Tosca to '##' (selective default) and the issue-level rating on the first-lien term loan to 'D' (default)...

Research Update