S&P assigns B+ to Ryan, loans

S&P said it assigned B+ ratings to Ryan LLC and its planned seven-year $950 million term loan, a $190 million delayed-draw term loan, and a five-year $225 million revolver. The recovery rating for the loans is 3 indicating meaningful (50%-70%; rounded estimate: 55%) recovery in default. The outlook is stable.

“Our rating reflects Ryan's decades-long operating tenure and track record of maintaining relatively consistent profitability, offset by a competitive landscape with larger, well-capitalized players. The company serves a diverse base of over 7,000 clients including about 76% of Fortune 500 across 12 practice lines and has demonstrated a good retention rate of about 95% over the past five years.

“Ryan is the largest pure-play tax service provider in a competitive and highly fragmented industry. The company competes with larger multi-service entities, including accounting and auditing firms that have larger tax services departments. However, regulatory limitations applicable to large auditing companies with tax service offerings limit the competitive threat to Ryan's business,” S&P said in a statement.

The agency added, “We believe management is committed to its financial policy and maintaining leverage within its target range. Ryan's financial policy is supportive of the current rating, and we view its leverage profile and ability to generate cash flow favorably compared to B rated, financial sponsor-owned peers. We believe the founder CEO's (Brint Ryan) controlling position somewhat offsets the leveraging risk that is typical of financial sponsor-owned issuers.”

S&P said it forecasts leverage in the mid-5x area in 2023, about 5x after accounting for EBITDA contributions from its intended acquisitions, slowly improving to the high-4x and mid-4x area in 2024 and 2025, respectively.

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