Atlas Logistics (ATLS) — First-Lien Term Loan
Executive Summary
Demo purchase of $100M face of First-Lien Term Loan at 96.5 (cash investment $97.0M): current yield 8.2%, yield to maturity 11.1%. Recommendation: HOLD. Credit score 56/100 (Elevated risk). Base-case IRR 11.3%, downside 8.3%, severe 1.7%; probability-weighted IRR 7.8% vs a 12% hurdle; weighted P(default) 45%; severe-case valuation recovery 78%. HOLD (do not size yet): Base-case IRR clears hurdle (11.3% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (7.8% vs ≥ 12.0%); Principal protected in severe case (recovery ≥ price) (78 vs 96.5 vs recovery ≥ price).
Investment Thesis
Term loan at 96.5 matures June 2027 and should refinance in the base case; the question is downside. Short-dated loan with asset coverage of 1.3x is a short-duration pull-to-par candidate if the refinancing window stays open.
The question: Does a 11.1% yield on a rank-1 secured claim compensate for 45% probability-weighted default risk and 22% severe-case loss?
Company Overview
Truckload, brokerage and warehousing operator with freight-cycle exposure and a 2027 term loan maturity. HQ Memphis, TN; Transportation / Asset-Light Freight & Warehousing. FY2025A revenue $2.8B, EBITDA $308M (11.0% margin); total debt $1.5B, cash $140M. DEMO DATA
Industry / Market
Freight is in a prolonged soft patch; balance sheets with near-term maturities are the ones that matter.
Historical Financial Performance
| $M | FY2022A | FY2023A | FY2024A | FY2025A |
|---|---|---|---|---|
| Revenue | $2.9B | $3.0B | $2.8B | $2.8B |
| % growth | 1.7% | -4.4% | -0.7% | |
| Direct costs / COGS | $2.2B | $2.3B | $2.2B | $2.2B |
| Gross profit (NOI for real estate) | $681.5M | $678.5M | $634.5M | $616.0M |
| % margin | 23.5% | 23.0% | 22.5% | 22.0% |
| Operating expenses (cash, adjusted) | $319.0M | $324.5M | $310.2M | $308.0M |
| EBITDA (company-adjusted basis) | $362.5M | $354.0M | $324.3M | $308.0M |
| % margin | 12.5% | 12.0% | 11.5% | 11.0% |
| D&A | $145.0M | $147.5M | $141.0M | $140.0M |
| Share-based compensation | $0.0M | $0.0M | $0.0M | $0.0M |
| EBIT | $217.5M | $206.5M | $183.3M | $168.0M |
| Interest expense | $91.6M | $97.0M | $102.4M | $107.8M |
| EBT | $125.9M | $109.5M | $80.9M | $60.2M |
| Taxes | $31.5M | $27.4M | $20.2M | $15.1M |
| Net income (model basis) | $94.4M | $82.1M | $60.7M | $45.2M |
| Capex | $174.0M | $177.0M | $169.2M | $168.0M |
| Working capital & other cash items | $6.8M | $6.0M | ($15.6M) | ($2.4M) |
| Free cash flow | $58.6M | $46.6M | $48.1M | $19.6M |
Capital Structure
| Tranche | Rank | Secured | Face value | Rate | Maturity | Mark / price |
|---|---|---|---|---|---|---|
| ABL Revolver | 1 | Yes | $150.0M | S+350bp | 2028-02-29 | — |
| First-Lien Term Loan | 1 | Yes | $600.0M | S+365bp | 2027-06-30 | 96.5 |
| Senior Unsecured Notes 6.50% | 3 | No | $750.0M | 6.50% | 2030-05-15 | 90.0 |
Total debt $1.5B (4.9x EBITDA); net debt $1.4B; liquidity $340M; loan-to-value through the target tranche 39%.
Credit Analysis
Net leverage 4.4x, EBITDA / interest 2.86x, FCF / debt 1.3%, DSCR 1.1x, liquidity ratio 3.0x. Score components: Leverage 8/15, Coverage 7/15, Liquidity 10/10, Free cash flow 2/10, Maturity risk 0/10, Margin stability 10/10, Revenue stability 8/8, Asset coverage 6/12, Industry risk 5/10. Score change vs FY2024A (same capital structure): 60 → 56 (Net leverage increased from 4.2x to 4.4x (-0.7 pts, negative); Interest coverage fell from 3.2x to 2.9x (-1.2 pts, negative); FCF / debt fell from 3.2% to 1.3% (-1.4 pts, negative)).
Debt Maturity Profile
| Period | Debt due | % of debt | Projected liquidity (Base) | Refinancing requirement |
|---|---|---|---|---|
| FY2027E | $600M | 40% | $375M | $225M |
| FY2028E | $150M | 10% | $380M | — |
| FY2030E | $750M | 50% | $456M | $294M |
Risk flag: $600M maturity in FY2027E; only $375M projected liquidity; $225M refinancing requirement.
Risk flag: $750M maturity in FY2030E; only $456M projected liquidity; $294M refinancing requirement.
| Tranche | Matures | Balance at maturity | Cash on hand | Net lev. (test ≤) | Pro-forma coverage (test ≥) | Refi rate | Interest burden after | Result | Resolution |
|---|---|---|---|---|---|---|---|---|---|
| First-Lien Term Loan | FY2027E | $588.0M | $0M | 4.1x (8.5x) | 3.28x (1.20x) | 8.5% | $48.1M | REFINANCING PASS | Partly repaid from cash; remainder refinanced |
| ABL Revolver | FY2028E | $3.6M | $0M | 3.9x (8.5x) | 3.49x (1.20x) | 8.5% | $0.0M | REFINANCING PASS | Repaid from cash |
| Senior Unsecured Notes 6.50% | FY2030E | $750.0M | $58M | 3.4x (8.5x) | 3.29x (1.20x) | 8.5% | $55.3M | REFINANCING PASS | Partly repaid from cash; remainder refinanced |
Base Case
Revenue CAGR 2.0%; FY2030E EBITDA $365M (11.8% margin); trough EBITDA $314M; peak net leverage 4.3x; minimum EBITDA / interest 2.91x; cumulative FCF $162M. No payment default modelled. IRR 11.3%, MOIC 1.11x.
Downside Case
Revenue CAGR -1.4%; FY2030E EBITDA $224M (8.6% margin); trough EBITDA $169M; peak net leverage 8.7x; minimum EBITDA / interest 1.56x; cumulative FCF ($303M). Payment default modelled in FY2027E; target-tranche recovery 100%. IRR 8.3%, MOIC 1.25x.
Severe Downside
Revenue CAGR -7.7%; FY2030E EBITDA $94M (5.0% margin); trough EBITDA $26M; peak net leverage 61.6x; minimum EBITDA / interest 0.21x; cumulative FCF ($750M). Payment default modelled in FY2027E; target-tranche recovery 78%. IRR 1.7%, MOIC 1.05x.
Covenant Analysis
| FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | |
|---|---|---|---|---|---|
| Current metric | 4.29x | 4.04x | 3.80x | 3.54x | 3.28x |
| Covenant | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x |
| Headroom | 1.21x (22%) | 1.46x (26%) | 1.70x (31%) | 1.96x (36%) | 2.22x (40%) |
| Status | PASS | PASS | PASS | PASS | PASS |
| FY2026E | FY2027E | FY2028E | FY2029E | FY2030E | |
|---|---|---|---|---|---|
| Current metric | 6.77x | 8.73x | 8.36x | 7.90x | 7.42x |
| Covenant | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x | ≤ 5.50x |
| Headroom | −1.27x (-23%) | −3.23x (-59%) | −2.86x (-52%) | −2.40x (-44%) | −1.92x (-35%) |
| Status | BREACH | BREACH | BREACH | BREACH | BREACH |
Recovery Analysis
If the company defaults, recovery value is $715M (liquidation) in the severe case → 78% recovery (22% LGD) on the target tranche; downside 100%. Recovery value = MAX(going concern $131M, liquidation $715M) + cash, less administrative costs; severe case struck at FY2027E.
| Claim (by seniority) | Rank | Claim | Recovery | Recovery % | Loss | Loss % |
|---|---|---|---|---|---|---|
| Recovery value | $715.0M | |||||
| Less: administrative / DIP costs | ($28.6M) | |||||
| ABL Revolver | 1 | $279.0M | $217.0M | 77.8% | $62.0M | 22.2% |
| First-Lien Term Loan | 1 | $603.7M | $469.4M | 77.8% | $134.2M | 22.2% |
| Senior Unsecured Notes 6.50% | 3 | $762.2M | $0.0M | 0.0% | $762.2M | 100.0% |
| Total claims | $1.6B | $686.4M | $958.4M | |||
| Equity (residual) | $0.0M | Wiped out | ||||
Investment Returns
| Base Case | Downside | Severe Downside | |
|---|---|---|---|
| Face value / purchase price / cash investment | $100M / 96.5 / $97.0M UNDERWRITING ASSUMPTION | ||
| Cash interest + exit/recovery proceeds | $7.9M + $100.0M | $18.6M + $102.3M | $21.6M + $79.8M |
| Capital gain / (loss) vs purchase price | $3.5M | $5.8M | ($16.7M) |
| MOIC | 1.11x | 1.25x | 1.05x |
| IRR (hurdle 12%) | 11.3% | 8.3% | 1.7% |
Key Risks
- Refinancing: $600M maturity in FY2027E; only $375M projected liquidity; $225M refinancing requirement.
- Severe case produces a payment default in FY2027E.
- Severe-case valuation recovery of 78% is below the 96.5 purchase price: a 22% loss given default.
- Covenants breach in the Downside case (FY2026E); none in the Base case.
- Elevated leverage: net debt / EBITDA 4.4x.
Key Protections
- First-priority secured position on substantially all assets; 0% of recovery value is senior to us and 39% through our tranche.
- Coverage of 2.86x EBITDA / interest; EBITDA can fall 65% before coverage reaches 1.0x.
- Liquidity of $340M (23% of total debt).
- Base-case refinancing tests pass for all 3 maturing tranche(s); 1 are repaid from cash.
- Short-dated pull-to-par
Catalysts
- Refinancing launch in H2-2026
- Freight index turn
Due Diligence Items
| Item | Status | Priority | Open question |
|---|---|---|---|
| Working capital and capex needs | Issue Identified | Medium | Are capex and working capital run-rates sustainable? |
| Revenue and customer concentration | Not Started | Medium | Top-10 customer share and contract terms? |
| Supplier concentration | Not Started | Low | Any single-source dependencies? |
| Competitive position and management | Not Started | Medium | Share trend and management track record? |
| Debt documentation review | In Progress | High | Priming / drop-down protections and baskets? |
| Covenant package and definitions | In Progress | High | Covenant EBITDA definition and headroom? |
| Maturity profile and refinancing plan | In Progress | High | Is the refinancing plan credible at current leverage? |
| Guarantees and structural subordination | Issue Identified | Medium | Which entities guarantee; any non-guarantor leakage? |
| Industry conditions and pricing | Not Started | Medium | Where are we in the industry cycle? |
| Macro and rate sensitivity | Not Started | Low | How does the credit behave at +300 bps? |
Recommendation
HOLD. HOLD (do not size yet): Base-case IRR clears hurdle (11.3% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (7.8% vs ≥ 12.0%); Principal protected in severe case (recovery ≥ price) (78 vs 96.5 vs recovery ≥ price).
| Test | Actual | Required | Weight | |
|---|---|---|---|---|
| ✗ | Base-case IRR clears hurdle | 11.3% | ≥ 12.0% | core |
| ✗ | Expected-cash-flow IRR (probability-weighted) clears hurdle | 7.8% | ≥ 12.0% | core |
| ✓ | Downside IRR stays above floor | 8.3% | ≥ 0.0% | core |
| ✓ | Downside recovery meets minimum (valuation waterfall) | 100.0% | ≥ 60.0% | core |
| ✓ | Base-case refinancing succeeds | PASS | PASS | core |
| ✓ | Entry yield meets minimum | 11.1% | ≥ 9.0% | secondary |
| ✓ | Net leverage within maximum | 4.4x | ≤ 6.0x | secondary |
| ✓ | Covenant headroom (base case, minimum) | 22.0% | ≥ 15.0% | secondary |
| ✗ | Principal protected in severe case (recovery ≥ price) | 78 vs 96.5 | recovery ≥ price | secondary |
| ✗ | No unresolved high-priority diligence | 3 open | 0 open | secondary |
What would change my mind?
- EBITDA declines more than 65% from FY2025A (coverage < 1.0x) — or more than 20% (first covenant breaks).
- The entry price is above 95.9: the base case no longer earns the 12% hurdle (assumed price 96.5).
- Severe-case recovery returns the purchase price only if the distressed valuation multiple is at least 34.0x EBITDA (the severe case assumes 5.0x); the question is how much cushion we want.
- Collateral / enterprise value falls more than 59% from the base-case valuation: the tranche starts to take losses.
- Market access weakens: base-case pro-forma coverage at refinancing is 3.28x vs the 1.20x test, at an assumed 8.5% refinancing rate — a higher spread or lower EBITDA flips the test.
Sources (3)
| Source | Document | Data type | Period | Accession | Doc date | Retrieved | Class |
|---|---|---|---|---|---|---|---|
| CreditIQ demo dataset | Atlas Logistics — illustrative financial statements FY2022–FY2025 | Income statement / cash flow | FY2022–FY2025 | — | 2026-03-31 | 2026-03-31 | DEMO DATA |
| CreditIQ demo dataset | Atlas Logistics — illustrative capital structure & covenants | Debt schedule | As of 2026-03-31 | — | 2026-03-31 | 2026-03-31 | DEMO DATA |
| CreditIQ demo dataset | Illustrative indicative bid marks (% of par) | Market price | 2026-03-31 | — | 2026-03-31 | 2026-03-31 | DEMO DATA |
Generated entirely from the structured model (inputs → analysis → memo): every figure reconciles to the Excel workbook (see Settings → Reconciliation). Hypothetical terms are underwriting assumptions. Not investment advice.