S&P rates Royal Holdings loan tack-on B-

S&P said it assigned its B- issue-level and 3 recovery ratings to Royal Holdings Inc.’s proposed $55 million tack-on to its first-lien term loan due 2022.

The company plans to use proceeds to pay down a portion of its second-lien term loan. It is also in the process of repricing the first-lien term loan.

The 3 recovery rating indicates an expectation for meaningful recovery (50% to 70%; lower half of the range) in the event of payment default. The agency expects to withdraw the ratings on the existing first-lien term loan once the transaction closes.

The issue-level and recovery ratings on Royal Holdings’ cash flow revolver due in 2020 remain B- and 3, respectively. The 3 recovery rating indicates an expectation for meaningful recovery (50% to 70%; lower half of the range) in the event of payment default.

At the same time, S&P affirmed the CCC issue-level and 6 recovery ratings on the second-lien term loan. The 6 recovery rating indicates an expectation for negligible recovery (0% to 10%) in the event of payment default.

The company’s other ratings, including the B- corporate credit rating, are unchanged.

The outlook is stable.

S&P said the rating reflects its assessment of the business risk profile as weak and financial risk profile as highly leveraged. The agency chose the lower anchor outcome between b and b- based on its assessment that Royal Holdings' financial risk profile is at the weaker end of the highly leveraged category. Modifiers do not affect the rating.

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