Preferred Proppants LLC Rating Lowered To #CCC# On Weaker Credit Profile And Outlook Negative

Stocks and Financial Services Press Releases Thursday July 14, 2016 08:42
NEW YORK--14 Jul--S&P Global Ratings
NEW YORK (S&P Global Ratings) July 13, 2016--S&P Global Ratings said today itdowngraded Radnor, Pa.-based sand producer Preferred Proppants LLC to 'CCC'from 'B'. The outlook is negative.

At the same time, we lowered our issue-level rating on the company'sfirst-lien term loan to 'CCC+' from 'B+'. The '2' recovery rating on the debtis unchanged, indicating our expectation of substantial (70%-90%; lower halfof the range) recovery of principal and interest in the event of a paymentdefault.

"The negative outlook reflects our expectation that Preferred Proppants'liquidity position will remain under pressure over the next 12 months,increasing the risk of a default or distressed debt restructuring," said S&PGlobal Ratings credit analyst Ryan Gilmore.

We could lower ratings if a default, distressed exchange, or redemptionappeared inevitable within six months. This could occur if demand and pricesfor frac sand remained at current levels, resulting in further cash and ABLfacility usage, or if the company breached its financial covenants.

It is unlikely we would raise the rating in the next 12 months given theweakness in the oil and gas market. However, we could raise ratings if wedeemed liquidity to be adequate. This could occur if Preferred Proppantsimproved its liquidity position via asset sales or other capital infusion suchthat we did not anticipate a liquidity shortfall or other default scenarioover the subsequent 12 months.

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