NEW YORK (Standard & Poor's) Dec. 10, 2012--Standard & Poor's Ratings Services today revised its recovery rating on Newpark Resources Inc.'s $172.5 million 4% senior unsecured convertible notes due 2017 to '3' from '5'.
At the same time, we raised our issue rating on the notes to 'B' from 'B-'. The '3' recovery rating indicates our expectation of meaningful (50% to 70%) recovery in the event of a payment default. The 'B' corporate credit rating on Newpark Resources remains unchanged.
Our revised recovery rating reflects our revised, higher valuation for the company in a default scenario. For our full recovery analysis, see Standard & Poor's recovery report on Newpark Resources, to be published shortly on RatingsDirect.
The 'B' rating and stable outlook on Newpark Resources reflects our assessment of the company's "vulnerable" business risk, "aggressive" financial risk, and "strong" liquidity. Newpark operates in three business lines: drilling fluids, composite mats, and environmental services, with drilling fluids accounting for over 80% of revenues and 50% of operating income. Our ratings incorporate Newpark's small scale relative to its main competitors in the drilling fluids segment, its dependence on one product line, its lower margins relative to its mid-cap oilfield service peers, along with its low leverage and strong liquidity.
Related Criteria And Research
Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009
Temporary contact numbers: Carin Dehne-Kiley (917-496-8208); Lawrence Wilkinson (212-991-8514)
Newpark Resources Inc.
Corporate credit rating B/Stable/--
Rating Raised; Recovery Rating Revised
$172.5 mil 4% convertible nts due 2017 B B-
Recovery rating 3 5