S&P rates Exova notes B-

Standard & Poor's said it assigned a B long-term corporate credit rating to Exova Group Ltd. and a B- issue rating to group subsidiary Exova Ltd.'s £155 million proposed senior unsecured notes with 5 recovery rating, indicating expectation of 10% to 30% recovery.

The agency also assigned a BB- issue rating to Exova Ltd.'s cumulative £136 million senior bank facilities excluding term loan A. The recovery rating is 1, indicating expectation of 90% to 100% recovery for secured creditors in the event of a payment default.

The outlook is stable.

"The ratings on U.K.-based testing services provider Exova reflect our view of the group's highly leveraged financial risk profile, limited scale of operations, and relatively limited short-term cost-base flexibility," S&P analyst Mohammed Fayek said in a statement.

"The ratings also reflect the risks associated with the group's acquisitive strategy, albeit limited to small bolt-on acquisitions, to build critical mass and geographic presence."

Exova's weaknesses are partially mitigated by its solid business position, the group serving in a profitable and relatively stable industry and by sound geographic and client-base diversity, the agency said.

Ratings are also supported by Exova's reputable track record, with solid accreditations and client-specific approvals that provide some barriers to entry, the agency noted.

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