S&P downgrades Infor, rates loans B

S&P said it lowered the corporate credit rating on Infor Inc. to B- from B.

The agency also said it assigned a B rating and 2 recovery rating on the company's proposed $2.4 billion term loan and €750 million term loan, both due in 2022.

The 2 recovery rating indicates 70% to 90% expected default recovery.

S&P also said it lowered the ratings on the company's secured debt to B from B+. The 2 recovery rating is unchanged.

The agency also said it lowered the rating on its unsecured debt to CCC+ from B-. The 5 recovery rating is unchanged and indicates 10% to 30% expected default recovery.

The agency also said it lowered the rating on Infor's holding company notes to CCC from CCC+. The 6 recovery rating is unchanged and reflects 0 to 10% expected default recovery.

The outlook is stable.

The proceeds of the new loans will be used to repay the company’s existing term loans.

The downgrade reflects an expectation that the company’s adjusted leverage will rise to the mid-10x range, up from about 8x in fiscal 2015, S&P said.

This was due to elevated one-time costs related to cost reductions, the GT Nexus acquisition and the company's increasing sales of SaaS products, which provide lower near-term revenue than higher-margin perpetual license sales, the agency said.

S&P said it expects leverage to lower to the mid- to high-8x range in fiscal 2018 as the company realizes cost savings and as high one-time costs moderate.

The ratings also consider the competitive operating environment with both large scale incumbents and nimble challengers, the agency said.

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