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S&P revises ACCO unsecured recovery to 4
S&P said it revised the recovery rating on ACCO Brands Corp.'s senior unsecured notes to 4 from 3.
The BB rating on the notes is unchanged.
The 4 rating reflects 30% to 50% expected default recovery.
The recovery rating revision follows news that the company is refinancing its unrated senior secured facilities, which extended the maturity date on the loans to 2024, upsized the revolving credit facility to $600 million from $500 million and established a new $100 million term loan facility.
S&P said it estimates this increase in secured debt within the company's capital structure will result in reduced prospects for unsecured noteholders under our simulated default scenario.
As part of the refinancing, the company also established more favorable amendments to enhance operating flexibility, the agency said.
This included replacing the minimum fixed-charge coverage with a minimum interest coverage ratio, lowering the pricing with its current leverage ratio and reducing annual amortization payments for the term loans, S&P said.
The proceeds will be used from the new term loan facility to reduce outstanding borrowings on the revolver by $100 million, the agency said.
The repayment, in conjunction with the upsized revolver, creates about $200 million in additional liquidity and results in a leverage-neutral transaction, S&P said.
The agency said it believes the favorable amendments to the credit agreement and additional liquidity provided will give the company more flexibility as it navigates challenging macroeconomic conditions and pursues its strategy of making tuck-in acquisitions.
The refinancing does not change expectations for credit measures, S&P said.
The agency said it continues to expect that ACCO will maintain an adjusted debt leverage of lower than 4x over the next 12 months.
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