S&P affirms Veritas ratings

Standard & Poor's said it affirmed its ratings on Veritas DGC Inc. (BB+\negative\--) following the company's announcement that it will refinance a large portion of its secured debt by issuing new unsecured convertible notes.

The outlook remains negative.

In a privately placed transaction, Veritas is selling up to $155 million of senior unsecured convertible notes priced at three-month Libor less a spread of 0.75%, that will be used to repay up to $130 million of bank debt that carries an average interest rate of around 8.5%. As such, Veritas will save about $7 million per year on interest expense, provided that interest rates are not raised.

While S&P said it views the interest cost savings and the financial flexibility stemming from the reduction of secured obligations as positive for Veritas' credit quality, the company also will use about $20 million of the offering proceeds to repurchase common shares, which (combined with offering fees and prepayment penalties) reduces the benefits of the new bond offering. Therefore, S&P views the financing activity in its entirety as largely neutral to Veritas' ratings.

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