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The Shareholder Forumtm

support for fair value realization

of stock investments in

DBM Global Incorporated

(f/k/a Schuff International Inc.)

 
 

Support of Minority Shareholder Interests

The Shareholder Forum had offered to support Appraised Value Rights ("AVR") of DBM (f/k/a Schuff International) minority shareholders in 2014 following a $31.50 per share tender offer by the company's controlling shareholder, HC2 Holdings, Inc., with the stated intent to proceed with a short-form merger "as soon as practicable.”

HC2 acquired DBM shares in the 2014 tender offer and other purchases bringing its total holdings to 92% of outstanding DBM shares, but has not proceeded with a merger. The Forum has continued to support the minority shareholder interests of its AVR participants in this context.

 
     

 

 

Source: Standard & Poor's Ratings Services, November 4, 2014 report

HC2 Holdings Inc. Assigned 'B' Corporate Credit Rating; Outlook Stable; Senior Secured Notes Rated 'B'

Publication date: 04-Nov-2014 22:24:02 GMT

  • Herndon, VA-based operating holding company HC2 Holdings Inc. plans to issue $250 million senior secured notes to refinance outstanding borrowings under its credit facility, which it had used previously to make acquisitions.
  • We are assigning our 'B' corporate credit rating to HC2.
  • We are also assigning our 'B' issue rating and '4' recovery rating to the company's proposed $250 million senior secured notes.
  • The stable outlook reflects our expectation for continued weak asset diversity and stretched coverage metrics over the next year, along with our expectation for liquidity to remain "adequate," particularly given cash balances pro forma for the proposed note issuance.

NEW YORK (Standard & Poor's) Nov. 4, 2014--Standard & Poor's Ratings Services today said it assigned its 'B' corporate credit rating to Herndon, VA-based operating holding company HC2 Holdings Inc. The rating outlook is stable.

At the same time, we assigned our 'B' issue rating and '4' recovery rating to the company's proposed $250 million senior secured notes. The '4' recovery rating indicates our expectation for average (30%-50%) recovery in a payment default scenario.

Our rating on HC2 reflects the company's weak asset diversity, with portfolio concentration in two companies (Schuff International Inc. and Global Marine Systems Ltd. [GMSL]); limited financial flexibility, with significant asset value in controlled companies; as well as a short track record, with the stated investment strategy of seeking controlling equity stakes and maintaining ownership over an extended time horizon. We expect coverage metrics will remain stretched and potentially volatile over the next two years, given the company's asset profile and limited track record.

"The stable rating outlook reflects our expectation for continued weak asset diversity and stretched coverage metrics over the next year," said Standard & Poor's credit analyst Robyn Shapiro. "But it also reflects our expectation for liquidity to remain adequate, particularly given cash balances pro forma for the proposed note issuance."

We expect a total debt service coverage ratio of about 1x in fiscal 2015, and we anticipate dividend capacity at existing portfolio companies could support coverage.

We could lower our ratings if HC2's liquidity profile weakens to "less than adequate." We believe this could occur if dividends from the two main portfolio investments fall as a result of an unexpected decline in operating performance at one or more operating subsidiaries, because of project losses, for example. Alternatively, this could occur if HC2 acquires companies that are unable to pay consistent dividends, resulting in secured debt coverage sustained below 1x.

We could raise our ratings if HC2 acquires companies that pay consistent dividends, which would reduce the expected volatility of the company's cash flow sources and would strengthen asset diversity. In this scenario, HC2 would need to maintain the total debt service coverage ratio consistently above 2x.

RELATED CRITERIA AND RESEARCH

 

Related Criteria

Related Research

Economic Research: U.S. Economic Forecast: Swinging Into September, Sept. 24, 2014

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

 

Primary Credit Analyst:

Robyn P Shapiro, New York (1) 212-438-7224;
robyn.shapiro@standardandpoors.com

Secondary Contact:

Michael E Durand, CFA, New York (1) 212-438-1138;
michael.durand@standardandpoors.com

Recovery Analyst:

Greg T Maddock, New York (1) 212-438-7205;
greg.maddock@standardandpoors.com

 

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The project supporting investor interests in DBM Global Incorporated (f/k/a Schuff International, Inc.) is being conducted by the Shareholder Forum for the benefit of Participants that have reserved Appraised Value Rights ("AVR") Management, subject to conditions including standard Forum policies that each Participant is expected to make independent use of information obtained through the Forum and that participation is considered private unless the Participant specifically authorizes identification.

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