S&P rates CommScope loan BB, notes BB, B+

S&P said it assigned a BB rating and 2 recovery rating to CommScope Inc.'s proposed seven-year $3.869 billion secured term loan, five-year $1 billion secured notes and seven-year $1 billion secured notes.

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

S&P also said it assigned a B+ rating and 5 recovery rating to CommScope's proposed eight-year $1 billion unsecured notes.

The 5 recovery rating indicates 10% to 30% expected default recovery.

The proceeds will be used to acquire the equity of ARRIS International plc, repay ARRIS's debt and repay CommScope's existing term loan, S&P said.

The company will also issue a new $1 billion asset-based lending facility, which will replace its existing $550 million facility, the agency noted.

The BB- rating on CommScope's existing unsecured notes remains on CreditWatch with negative implications.

When the transaction closes, S&P said it plans to lower the rating on the notes to B+ and revise the recovery rating to 5 from 4, which is the same recovery rating assigned to the company's new unsecured notes.

CommScope will repay its existing term loan as part of the transaction.

The BB- issuer credit rating and negative outlook on CommScope Holding Co. Inc., the ultimate parent of the CommScope group, are unchanged, reflecting a view that the company will operate near the limit of its current rating with pro forma adjusted leverage in the low-6x range, S&P said.

The new $1 billion of convertible preferred equity will be treated as debt because there could be an incentive for CommScope to eventually negotiate a redemption using the proceeds from a new debt issuance, the agency explained. The company's leverage is expected to fall to the mid-5x range in 2019 and to the high-4x range in 2020, S&P said.

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