S&P lowers TransDigm, rates loan B+, notes CCC+

Standard & Poor's said it lowered the ratings on TransDigm Inc., including its corporate credit rating to B from B+.

The outlook is stable.

The agency also said it assigned a B+ rating and 2 recovery rating to the proposed $700 million first-lien term loan. The 2 recovery rating indicates 70% to 90% expected default recovery.

S&P also said it assigned a CCC+ rating and 6 recovery rating to the new subordinated notes due 2021. A 6 recovery rating indicates 0% to 10% expected default recovery.

The downgrade reflects an expectation that leverage will continue to fluctuate as the company completes acquisitions and pays special dividends and subsequently de-levers, the agency said.

However, the range of leverage likely will be higher than in the past due to what is believe is a shift to a more aggressive financial policy, S&P said.

On June 18, TransDigm announced plans to pay a $1 billion to $1.8 billion debt-financed dividend, the agency said.

The debt will include a new $700 million seven-year senior secured first-lien term loan and a potential addition of $700 million of new subordinated debt, S&P said.

This follows a $664 million debt-financed dividend in November 2012. The additional debt results in a material deterioration in credit ratios and suggests a shift toward a more aggressive financial policy with a larger appetite for leverage, the agency said.

The company's efficient operations, very high profit margins, well-established positions in niche markets for highly engineered aircraft components and good product diversity partially offset this, S&P said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.