Research Update: U.S. TelePacific Holdings Corp. Downgraded To 'SD'; Debt Ratings Lowered

U.S.-based competitive telecommunications and cloud provider U.S. TelePacific Holdings Corp. (d/b/a TPx Communications) completed an exchange of its $582 million outstanding senior secured term loan B due May 2023 for a new super senior term loan B due May 2026 (to be rated at a later date). It also extended the maturity of the $25 million revolving credit facility to November 2025 from May 2022. We view the transaction as a distressed exchange given the high likelihood of a conventional default in the absence of the transaction, and our view that despite the higher rate on the term loan, the pay-in-kind (PIK) feature for the first two years is not sufficient compensation for the maturity extension. We lowered our ratings

... cloud provider U.S. TelePacific Holdings Corp. (d/b/a TPx Communications) completed an exchange of its $582 million outstanding senior secured term loan B due May 2023 for a new super senior term loan B due May 2026 (to be rated at a later date). It also extended the maturity of the $25 million revolving credit facility to November 2025 from May 2022. - We view the transaction as a distressed exchange given the high likelihood of a conventional default in the absence of the transaction, and our view that despite the higher rate on the term loan, the pay-in-kind (PIK) feature for the first two years is not sufficient compensation for the maturity extension. - We lowered our ratings on TPx to '##' (selective default) from '###-'. We also lowered our issue-level rating on the company's senior secured debt to 'D' from '###-'. - We will reassess the issuer credit rating and issue-level rating on the new debt in the next couple of weeks....

Research Update