S&P puts First Advantage on watch

S&P said it placed all of its ratings on First Advantage Corp. on CreditWatch with negative implications.

First Advantage announced an agreement to acquire Sterling Check Corp. in a transaction valued at $2.2 billion, along with initial financing plans calling for the company to take on approximately $1.8 billion of incremental debt (from $565 million currently) to help finance the transaction.

At this debt level, pro forma starting leverage could exceed 6x at closing, S&P said.

“The CreditWatch placement reflects the leveraging nature of the transaction and the potential for us to lower our ratings on First Advantage after we gain a better understanding of how it will affect the considerations underpinning our existing business and financial risk assessments on the company, including its business strategies and integration plans, capital structure, forecasted credit ratios, and financial policy,” S&P said in a news release.

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