S&P rates Iris, loan B, notes CCC+

S&P said it gave preliminarily B ratings to Iris Holding Inc. and its planned $1.5 billion secured term loan. The preliminary recovery rating on the loan is 3. The agency also preliminarily assigned CCC+ issue and 6 recovery ratings to the company’s planned $400 million of unsecured notes. Iris also plans to obtain a $250 million asset-based lending facility expected to be undrawn at close.

Clearlake Capital Group LP plans to complete its proposed acquisition of Intertape Polymer Group Inc. this year and recapitalize the company through Iris. Clearlake also intends to add $809 million in new equity and a $100 million subordinated payment-in-kind note.

“Our rating on Iris reflects our view of Intertape and its pro forma capital structure following its expected acquisition by Clearlake this year. We estimate Iris' adjusted debt to EBITDA at over 7x at the end of fiscal years 2022 and 2023, which is well above our previous estimates for Intertape (in the mid-2x area) before the acquisition announcement. The increase reflects incremental debt to be raised by Clearlake through its Iris subsidiary to fund the acquisition, and results in our highly leveraged financial risk assessment,” the agency said in a press release.

The outlook is negative mirroring the high estimated adjusted debt to EBITDA this year, and the potential that the company will not deliver enough earnings growth to reduce leverage below 7x in 2023 due to increasing macro-economic risks, S&P said.

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