S&P gives Royal Holdings loans B-, CCC

Standard & Poor's said it affirmed its B- corporate credit rating on Royal Holdings Inc.

The outlook is stable.

The agency also assigned its B- issue rating and 3 recovery rating to the company's proposed $50 million first-lien revolver and proposed $535 million first-lien term loan B. The 3 recovery rating indicates an expectation of meaningful (50% to 70%; the lower half of the range) recovery in the event of payment default.

At the same time, S&P assigned its CCC issue-level rating and 6 recovery rating to Royal’s proposed $180 million second-lien term loan. The recovery rating indicates an expectation of negligible (0% to 10%) recovery in the event of payment default.

The ratings are based on the credit facility's preliminary terms and conditions.

Royal Holdings has announced the proposed new capital structure resulting from the sale of Royal Adhesive & Sealants to American Securities LLC from Arsenal Capital Partners. Given the increased debt that will result from the new capital structure, S&P said it expects debt to EBITDA to be above 6 times for the next two years.

The agency believes the entry of a new financial sponsor increases our level of uncertainty regarding the company's financial policy and it factored this into the rating analysis.

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