S&P rates Sound United, loan B

S&P said it assigned B ratings to DEI Holdings Inc., operating as Sound United, and its planned $380 million senior secured term loan B due in 2028. The agency also assigned a 3 recovery rating to the loan. Sound United also plans to secure a $75 million asset-based revolver due in 2026 that will not be rated.

“The B issuer credit rating on Sound United reflects our assessment of its ownership by a financial sponsor and track record of operating with high leverage, participation in a niche and fragmented industry, relatively small scale, moderate brand concentration, and the discretionary high-ticket nature of its products,” S&P said in a press release.

The company intends to use the term loan proceeds to refinance $322 million of debt, pay $16 million in fees and expenses, and pay a $52 million distribution to shareholders who contributed capital for the Bowers & Wilkins acquisition in October.

The outlook is stable. “The stable outlook reflects our expectation for the company to realize cost synergies in fiscal 2022 that will offset modest revenue declines after lapping a very strong 2021, allowing it to continue deleveraging to the mid-3x area, from about 4.5x at the end of fiscal 2021,” S&P said.

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