NEW YORK: S&P Global Ratings has lowered the issuer credit rating to ‘CC’ from ‘CCC’ on APC Automotive Technologies Intermediate Holdings LLC (APC), and the issue-level rating on the first-lien term loan due 2024 to ‘CC’ from ‘CCC’ to reflect its view that this transaction, if completed, results in investors receiving less than the original promise of their securities and would constitute a selective default.

APC Automotive Technologies Intermediate Holdings LLC (APC) has announced a proposed exchange offer for its first-lien term loan, offering to exchange the existing 2025 loan for a mix of longer-tenure term loan As and a term loan B.

“We consider the exchange as a distressed transaction given the proposed maturity extension, the junior ranking of the exchanged term loan B, and the timing of the cash interest payments being slowed,” S&P noted in a press release.

“The negative outlook reflects the likelihood we will lower the issuer credit rating to ‘SD’ (selective default) at the close of the transaction and lower the rating on the term loan to ‘D’”.

The downgrade follows the announcement that APC is seeking to exchange its first-lien term loan for a combination A-1, A-2, A-3, and B term loans.

“We consider the exchange as a distressed transaction given the proposed maturity extension, the junior ranking of the exchanged term loan B, and the timing of the cash interest payments being slowed.

“We will reevaluate the issuer credit rating and issue-level ratings, including our recovery ratings, following the close of the offer. In our review, we will focus on the company’s ability to sustain its capital structure over the longer term, emphasizing our expectations for liquidity and leverage for APC”.