S&P pares Press Ganey, rates loan B-

S&P said it trimmed the ratings on Press Ganey (Azalea TopCo Inc.) and its senior secured credit facility to B- from B and rated its planned $400 million senior secured incremental first-lien term loan due 2026 B- with a 3 recovery rating. The 3 recovery rating indicates an expectation of meaningful (50%-70%l rounded estimate: 55%) recovery in default.

The agency also removed all the ratings from CreditWatch where they were placed with negative implications on Monday.

“The downgrade reflects a more aggressive acquisition pace, keeping leverage above 10x for several years. The acquisition of Forsta, the company's largest ever, is Azalea's fifth acquisition in the past two years. We expect acquisition activities will continue into the next few years as the company expands into adjacent markets outside of the core patient experience segment. We believe pro forma leverage (including preferred shares) will be around 10x-11x for 2022 assuming the Forsta transaction goes through regulatory approval and that adjusted free cash flow to debt will be low at about 2%,” S&P said in a press release.

Press Ganey will use the new loan and new equity to fund its acquisition of Forsta.

The outlook is stable.

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