S&P affirms ADMI on add-on

S&P said it affirmed the B rating on ADMI Corp.'s first-lien senior secured credit facility.

The recovery rating is 3, indicating 50% expected default recovery.

S&P also said it affirmed the CCC+ rating on the senior unsecured notes. The recovery rating is 6, indicating 0% expected default recovery.

ADMI, which operates under Aspen Dental, intends to issue a $175 million add-on to its senior secured first-lien term loan and $15 million upsize to its senior unsecured notes.

The proceeds and cash on hand will be used to fund a $200 million dividend to its shareholders, the agency said.

The company’s B corporate credit rating is not affected by the transaction.

The outlook is stable.

The ratings reflect the increase in leverage resulting from the proposed issuance of a $175 million add-on to its senior secured first-lien term loan and $15 million increase to its senior unsecured notes, the agency said.

S&P said it expects that leverage will remain at higher than 5x and funds from operations-to-debt will remain in the low double-digit percentages over the long term.

While leverage increases modestly as a result of the dividend, the agency said it expects Aspen Dental to continue to generate some positive free cash flow.

The ratings reflect the company’s position as the largest dental services organization in the United States, S&P said, which is offset by its narrow operating focus in the highly fragmented and increasingly competitive dental services industry, which has low barriers to entry.

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