Moody's downgrades Shale-Inland notes

Moody's Investors Service said it changed Shale-Inland Holdings, LLC's outlook to negative from stable, downgraded its $250 million senior secured notes due 2019 to Caa1(LGD4) from B3(LGD4) and affirmed its B3 corporate family rating and B3-PD probability of default rating.

The change in outlook and the downgrade of the notes reflects Shale-Inland's recent weak operating results and weakened credit profile, which has increased the relative loss potential on the notes, the agency said.

Moody’s said Shale-Inland's B3 rating reflects its small size, elevated leverage, weak interest coverage, significant exposure to the cyclical downstream energy sector, the possibility of further debt-financed acquisitions and the company's low profit margins, which are typical of the distribution industry.

The ratings are supported by the company's exposure to MRO activity, long-term relationships with large and well-established customers as well as the countercyclical working capital needs and limited capital expenditure requirements of the distribution business model, the agency said.

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