Research Update: U.S. TelePacific Holdings Downgraded To 'CCC-' On Tight EBITDA Cushion And Potential Covenant Breach, Outlook Negative

U.S. TelePacific Holdings Corp.'s (doing business as TPx Communications) liquidity position deteriorated through 2022 due to its weaker operating and financial performance. The company also has a limited cushion under its maximum leverage covenant, which we believe it could breach in 2023 (when it steps down) absent a waiver or amendment. Additionally, given TPx's highly leveraged capital structure, we believe the likelihood that it will explore a restructuring in the next six months has increased. Therefore, we lowered our issuer credit rating on the company to 'CCC-' from 'CCC+'. At the same time, we lowered our issue-level rating on its $655 million senior secured term loan and $25 million revolving credit facility to 'CCC-' from 'CCC+'. Our '4' recovery rating

...- U.S. TelePacific Holdings Corp.'s (doing business as TPx Communications) liquidity position deteriorated through 2022 due to its weaker operating and financial performance. The company also has a limited cushion under its maximum leverage covenant, which we believe it could breach in 2023 (when it steps down) absent a waiver or amendment. Additionally, given TPx's highly leveraged capital structure, we believe the likelihood that it will explore a restructuring in the next six months has increased. - Therefore, we lowered our issuer credit rating on the company to '###-' from '###+'. - At the same time, we lowered our issue-level rating on its $655 million senior secured term loan and $25 million revolving credit facility to '###-' from '###+'. Our '4' recovery rating remains unchanged, indicating our expectation for average (30%-50%; rounded estimate: 40%) recovery in the event of a payment default. - The negative outlook reflects TPx's limited covenant cushion amid its continued weak...

Research Update