Leveraged Loans: Michael Baker pared at S&P; Moody’s cuts GK

  • Michael Baker, Global Knowledge downgraded
  • Outlook developing at MBI, engineering firm
  • Outlook cut to negative at GK, training-services firm

Michael Baker International was downgraded at Standard & Poor’s after the global engineering and construction firm postponed a plan to refinance debt.

S&P pared the corporate-credit rating on MBI to B- from B+ and made the same cut on its $350 million of senior secured notes.

The outlook on MBI, which is backed by DC Capital Partners of Alexandria, Virginia, is developing, analyst Christina Mcgovern wrote in a June 5 report.

That means she could raise or lower the rating in the next six months depending upon the Pittsburgh company’s ability to refinance its borrowings.

Mcgovern could affirm the B- rating if MBI refinances but other risks persist, including, among others, its ability to refinance payment-in-kind notes due 2019, issued by parent Michael Baker Holdings. McGovern cut the issue-level rating on the 8.875 percent PIK notes to CCC from B-.

A rating increase might be in order if MBI refinances its approaching maturities, improves liquidity, sets out a plan to refinance the PIK notes and boosts Moody’s confidence about the timing of future cash flows, the analyst wrote.

Separately, Moody’s Investors Service cut its rating on GK Holdings, the parent of Global Knowledge, the Cary, North Carolina, provider of professional training services.

Analyst Prateek Reddy pared the corporate-family rating on GK to Caa1 from B2 and made a similar cut on the company’s probability-of-default rating. He cut the outlook to negative from stable.

GK is backed by the New York private equity firm Rhone Group.

Training services is a fast-moving and competitive field, and GK is small relative to its rivals, the analyst said. (Revenue for the 12 months through March 31 was $300 million.) Meantime, GK’s “low” cash balance and availability of its revolving-credit line constrain its financial flexibility.

Moody’s expects cash flow to stay weak and the debt-to-EBITDA multiple to remain high – above 6.5x – at least through fiscal 2018 ending Sept. 30.

On the upside, the rating reflects GK’s wide international presence and diverse customer base. Margins in fiscal 2018 and beyond could fatten as the company has invested to improve efficiency, Reddy wrote.

The firms and companies couldn’t be reached for comment.

Action Item: Contact the S&P analyst: christina.mcgovern@spglobal.com

Michael Baker International, the nonprofit Bridges to Prosperity and local residents in El Zarzal, Nicaragua, built a suspension bridge that gives residents of El Zarzal and other communities access across the Rio Calico river to schools, health care, local markets and farming fields. Photo courtesy MBI.

Correct: An earlier version of this article included an email address for the Moody’s analyst that could not be verified. The article has been updated.