Moody’s cuts NN, view to negative

Moody’s Investors Service said it cut the probability of default rating for NN, Inc. to Caa1-PD from B3-PD, downgraded the speculative liquidity rating to SGL-4 from SGL-3 and withdrew its planned B3 rating on the company’s proposed $875 million loan.

The agency said it cut the probability of default rating because the rating reflects a single class of debt and lender group’s control has in calling a default because of covenants.

Moody’s said it sees liquidity as potential problem and the lower speculative liquidity rating reflects low cash levels, upcoming debt maturities and weak cash flow generation. As of Sept. 30, the company had about $16.7 million available after reductions for borrowings of $71.3 million, letters of credit and other limitations.

NN needs a long-term fix to the revolver and any solution will probably need to include the $270 million term loan due April 2021, the agency noted.

“The withdrawal of the B3 rating on NN’s proposed $875 million senior secured term loan incorporates the delay in the closing of the transaction and Moody’s belief that this delay is indicative that the closing of the term loan, along with a proposed $120 million asset based senior secured revolving credit facility, are unlikely to occur. This event is a credit negative for NN, as its current $110 million revolving credit facility matures in October 2020, and had $71.5 million of outstanding borrowings as of November 6, 2019,” said Moody’s in a press release.

Moody’s also revised the outlook for NN to negative from stable.

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