S&P rates EarthLink loans B+

S&P said it assigned its B+ issue-level rating and 2 recovery rating to EarthLink Holdings Corp.'s $125 million senior secured revolving credit facility and $50 million delayed-draw term loan due 2021.

The amended and extended revolver replaces the company's existing $135 million revolver due May 2017.

The 2 recovery rating indicates an expectation for substantial recovery (70%-90%; lower half of the range) recovery in the event of a payment default.

The agency expects EarthLink to use net proceeds from the term loan along with $40 million cash on the balance sheet and roughly $5 million of revolver borrowings to repay a portion of its existing 8 7/8% senior unsecured notes due 2019.

The credit facility contains a maximum 3.5 times net leverage covenant and a 2.5 times minimum interest coverage ratio. S&P expects the company to maintain more than 15% of EBITDA cushion under both these covenants over the next 12 months.

There is no change to Earthlink’s B corporate credit rating or stable outlook despite S&P’s expectation for modestly lower leverage in the mid-2 times area, compared to the previous forecast for leverage in the high-2 times area in 2016 as a result of the reduction in senior unsecured notes, the agency said.

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