Tutor Perini’s debt, which had “junk” status to begin with, is now even riskier, a major ratings agency said Thursday.
S&P downgraded the construction and engineering giant’s credit two levels across the board, citing the company’s near-term refinancing risk and higher-than-expected leverage.
Tutor Perini’s issuer credit rating was demoted from B+ to B- because of elevated leverage, S&P said. The ratings agency holds a negative outlook on the rating because of the firm’s short-term refinancing obstacles.
S&P said the company’s performance last year was weaker thanks to “significant adverse charges and settlements and the impact of unapproved work,” resulting in Tutor Perini’s leverage being “substantially higher than our expectation.”
The ratings agency said that the firm faces heightened refinancing risk because its secured debt would shift to January 2025 if the company is unable to refinance its unsecured debt. Refinancing has become harder across the business world since the Federal Reserve began pushing interest rates up to combat inflation.
S&P also lowered its issue-level rating on Tutor Perini’s term loan from BB to B+ (four levels below investment grade) and its rating on the company’s senior secured notes from B- to CCC (eight levels below). The recovery ratings of both were unchanged.
Bonds rated lower than BBB- are considered to be junk, which does not mean they are worthless but that they have higher risk than investment-grade bonds. Companies whose bonds are considered risky must pay higher interest to get investors to buy them.
Tutor Perini did not respond to a request for comment.
S&P’s downgrades come after Tutor Perini reported in its fourth-quarter earnings call earlier this month that sales fell by about 18 percent last year. The firm suffered a loss of almost $205 million in construction operations in 2022.
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Tutor Perini attributed its slowdown to a lack of major new contracts caused by the pandemic and clientele budget constraints: It was the low or preferred bidder on $10 billion in contracts that failed to materialize. The firm said it has several pending projects with contract awards expected this year that could exceed $3 billion altogether.
Tutor Perini’s stock is trading at $5.91 per share, which is down almost 22 percent year-to-date and more than 41 percent over the past year. Last fall the share price dipped to a 20-year low of $5.40. The company’s market capitalization is just over $300 million.