S&P rates Regus loan B-

Standard & Poor's said it assigned its preliminary B- long-term corporate credit rating to Regus Group plc, subject to a successful rights issue of $218 million, the placing of proposed $155 million senior secured facilities, and the successful acquisition of U.S.-based HQ Global Holding Inc.

The outlook is stable.

At the same time, S&P said it assigned a preliminary B- long-term rating to the $155 million senior secured credit facilities, with final maturity in 2010, issued by Regus Corp., the U.S. holding company. A recovery rating of 4 was also assigned to the loan.

"The preliminary ratings on Regus reflect the group's high operating leverage, mismatch in the duration of headleases and subleases, relatively short visibility, a fragmented and cyclical serviced-office industry, integration risk, and a very weak EBITDAR-to-interest and rent coverage ratio," said S&P credit analyst Kenneth Mak. "Positive rating factors include Regus' strong brand identity, good market position, and moderate working capital needs."

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