S&P rates Verde, loan, notes B+

S&P said it assigned B+ ratings to Verde Purchaser LLC, its planned $700 million term loan due 2030 and proposed $600 million of senior secured notes due 2030. The recovery ratings on the debt are 3 and the outlook is stable.

Clayton Dubilier & Rice established Verde to become the holding company for Veritiv Corp., which it agreed to buy for a total enterprise value of $2.6 billion. CD&R will also contribute $1.116 billion to fund the deal.

“Our rating reflects Veritiv's sizable market share within the fragmented packaging distribution industry, offset by continued expected weakness within its print solutions market. Veritiv maintains solid market share within its three main end markets: packaging (55% of 2022 net sales), facility solutions (11%), and print solutions (33%). We believe the company has a broad portfolio of products and offerings within the packaging segment, with over 50% of products custom and value-added, which creates further stickiness with customers compared with its traditional distribution network,” the agency said in a press release.

S&P said it forecasts lower revenue over the next two years for the company. “Despite the lower revenue, we expect S&P Global Ratings-adjusted EBITDA levels of roughly $500 million in 2023 and $450 million in 2024, which we believe will support leverage below 4x. Management has noted it will focus its excess cash flow on potential merger and acquisition opportunities and debt paydown, which would support credit metrics in line with current levels.”

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