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Phoenix Services seeks new capital to address cash needs

Phoenix Services is looking to raise incremental financing to shore up its liquidity coffers, according to two sources familiar with the situation. The borrower recently made overtures to certain lenders regarding its escalating capital needs, said one of the sources.

Over the last few weeks, the issuer’s capital structure crumbled deeper into distressed territory amidst earnings pressure combined with its tenuous liquidity position, sources added.  

Phoenix Services' USD 465m Libor+ 375bps (1% floor) term loan due March 2025 was quoted 35.5/41.063 today, versus a 56.884/59.063 context on 12 September and a 78.625/80.375 level on 28 June, according to Markit. Its USD 65m L+ 375bps revolver is quoted 35.5/41.064, down from a 62.021/64.292 on 23 August.  

The Apollo-sponsored company is working with a cadre of advisers for assistance in scoping out balance sheet solutions, as reported.

In May, Moody’s Investors Service downgraded the issuer’s ratings, citing its declining financial performance and the fast-approaching March 2023 maturity on its USD 65m Barclays-led revolver.

The provider of services to steel mills has struggled to generate free cash flow thanks to capex spending at new customer locations, as well as challenges in passing rising costs to customers, Moody’s noted.

Moody’s calculated the issuer's total leverage at 9.4x as of December 2021, compared to 4.8x in December 2017 amid a pandemic-driven decrease in demand for its services, and subsequent inflationary pressures, as well as increasing equipment lease liabilities.

The company has operations in North America, Europe, Africa, South America and the Middle East. Its services include cleanup, maintenance, material handling and logistics.

Messages left with the company were not returned. An Apollo representative declined comment.