S&P cuts FullBeauty, rates loans B-, CCC

Standard & Poor's said it lowered its corporate credit rating on FullBeauty Brands Inc. to B- from B.

The outlook is stable.

At the same time, the agency assigned its B- issue-level rating and 3 recovery rating to FullBeauty Brands Holdings Corp.'s proposed $820 million senior secured first-lien term loan due 2022. The 3 recovery rating indicates an expectation for meaningful recovery (lower end of the 50%-70% range) in a payment default scenario.

S&P also assigned its CCC issue-level rating and 6 recovery rating to FullBeauty Brands Holdings’ proposed $345 million senior secured second-lien term loan due 2023. The 6 recovery rating indicates an expectation for negligible recovery (0%-10%) in a payment default scenario.

"The downgrade reflects the sizable debt burden and highly leveraged financial profile following the buyout by Apax Partners," S&P credit analyst Anita Ogbara said in a news release.

"Pro forma for the transaction, we expect FBB's ratio of debt to EBITDA to be in excess of 7.0x, funds from operations to debt in the 8% area, and EBITDA interest coverage in the mid-3x area. Still, over the next 18 months we expect the company to continue to improve EBITDA margins, generate good cash flow, and reduce debt, which should result in debt to EBITDA in the 6.0x-6.5x area and FFO to debt in the high-single digits percent area."

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