S&P rates Filtration loan B

S&P said it assigned its B issue-level and 3 recovery ratings to Filtration Group Corp.’s proposed $400 million incremental first-lien term loan due 2025. The 3 recovery rating indicates expectations for meaningful (50%-70%; rounded estimate: 50%) recovery in the event of a default.

Filtration intends to use the proceeds to fund a dividend to shareholders, mostly affiliates of privately held Madison Industries.

“We believe the debt-funded dividend will cause the company’s S&P Global Ratings-adjusted debt-to-EBITDA to approach our 7.5x downside rating trigger at the end of 2020, which reduces the cushion for operating underperformance or additional debt-funded outflows. Still, FGC has a history of reducing leverage, primarily through EBITDA growth, and many of the company’s end markets are seeing favorable demand trends, which supports our forecast that leverage will decline to about 7x over the next 12 months,” the agency said in a press release.

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