Moody's rates Cactus Wellhead loans B3

Moody's Investors Service said it assigned a B3 corporate family rating, a B3-PD probability of default rating and an SGL-2 speculative grade liquidity rating to Cactus Wellhead, LLC and a B3 (LGD3) rating to its proposed $350 million first-lien senior secured term loan due 2020 and $50 million senior secured revolving credit facility. The outlook is stable.

The proceeds of the term loan will be used to repay existing debt and to pay a distribution to the company’s owners.

The agency said Cactus's B3 corporate family rating reflects the company's small size, its relatively short operating history, the inherent cyclicality of oil and gas drilling activity to which Cactus is exposed and the significant increase in leverage represented by this debt offering.

Offsetting these concerns are Cactus' strong presence and broad customer penetration in a product line that, while low in its relative cost, is a critical component of wellsite operations; its geographic scope; the financial flexibility imparted by its largely variable-cost business model and a seasoned management team who appears to have established a firm footing for future growth in profitability and cash flow with which to deleverage the company's balance sheet, Moody’s said.

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