Standard & Poor's Rating Services said last week it lowered its corporate credit and senior secured debt ratings on National Equipment Services Inc. to single 'B'-minus from double 'B'-minus. The subordinated debt rating was lowered to triple-'C' from single 'B'.
The downgrades reflect deteriorating construction market conditions and the company's near-term refinancing risk. Operating performance has been affected by the sluggish economy. Also, the company is confronted with significant maturities and liquidity issues that have required noncore asset sales, headcount reductions and other cost reductions. The outlook is negative. Total debt outstanding is about $750 million.
"The ratings reflect the company's weakened position in the highly fragmented equipment rental industry, limited liquidity, and near-term refinancing issues," said Standard & Poor's credit analyst John Sico.
NES has had to approach its banks for covenant relief. The company is also considering the sale of additional noncore businesses and a reduction in headcount. In addition, to conserve capital NES is holding down capital spending, which is expected to be about $38 million for 2002 and $57 million in gross capital expenditures in 2003. Meanwhile, in granting the amendments, the banks have reduced the facility to $550 million and placed other restrictions on the company, limiting its financial flexibility. The company needs to extend or refinance its credit facility that is due in July 2003 and $275 million in notes due in November 2004. Failure to make progress on refinancing near-term debt maturities could lead to a lower rating.
NES, Evanston, Ill., is No. 4 on the RER 100.
