S&P lifts Hillenbrand loans

S&P said it raised its issue-level rating on Hillenbrand Inc.'s $1 billion revolver and $200 million term loan A-1 to BBB- from BB+, and revised its recovery rating on both to 1 from 3, based on the addition of a springing lien provision to the credit agreement. The 1 recovery rating indicates very high (90%-100%; rounded estimate: 95%) recovery in default.

The agency concurrently affirmed the BB+ issue-level rating on Hillenbrand's senior unsecured notes consisting of $400 million notes due June 2025, $375 million notes due September 2026, and $350 million notes due March 2031. However, it revised the recovery rating on these unsecured notes to 4 from 3. The 4 recovery rating indicates average (30%-50%; rounded estimate 30%) recovery in default.

“The higher recovery rating on the revolver and term loan A-1 and lower recovery rating on the unsecured notes reflect the assumption in our simulated default scenario that the revolver and term loans become secured by the time of default, and therefore these loans would have priority claims on much of Hillenbrand's enterprise value (EV) we assume at default. Given the presence of secured claims ahead of unsecured notes claims in our default scenario, unsecured noteholders' recovery prospects are reduced to about 30%, from 50% in our previous analysis,” S&P said in a press release.

The outlook is stable.

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