BIS Industries Ltd. Rating Lowered To #CC# On Proposed Recapi Outlook Negative

Stocks and Financial Services Press Releases Friday July 21, 2017 17:12
MELBOURNE--21 Jul--S&P Global Ratings

MELBOURNE (S&P Global Ratings) July 21, 2017--S&P Global Ratings said today that it had lowered its long-term corporate credit rating on BIS Industries Ltd. to 'CC' from 'CCC-'. The outlook on the rating is negative.

At the same time, we affirmed the 'C' rating on the company's payment-in-kind (PIK) notes issued by BIS' related entity Artsonig Pty Ltd. The recovery rating on the PIK notes remains at '6', reflecting our expectation of negligible recovery prospects in the event of default.

We lowered the corporate credit rating on BIS because the company has announced that it has reached an agreement in principle with its lenders for the recapitalization of its balance sheet. The agreement establishes a proposed recapitalization of BIS by way of a scheme of arrangement, which would include a debt-for-equity swap for both the lenders and subordinated PIK noteholders.

The proposed transaction will extinguish about A$1 billion or 80% of the company's total outstanding debt. In exchange, both lenders and PIK noteholders will assume ownership of BIS' operating entities.

The scheme is subject to the necessary approvals by stakeholders. However, we believe the probability of it been implemented is highly likely given a reduction in debt is needed for the ongoing viability of the business.

Although we are lowering the rating today, we note that a reduction in leverage will be positive overall. This should result in a more sustainable capital structure and allow BIS to pursue further growth opportunities in the future.

The negative outlook reflects the likelihood that we will lower the rating to 'SD' (selective default) following completion of any debt-for-equity conversion. This is likely to occur in the fourth quarter of 2017.


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