S&P rates EM Midco 2, loan B

S&P said it preliminarily assigned B ratings to EM Midco 2 Ltd. and its planned $1.825 billion term loan split across a dollar- and euro-denominated tranche. The preliminary recovery rating on the loan is 3.

Temasek is buying Element Materials Technology Ltd. from private equity company Bridgepoint, via EM Midco 2. Temasek was a minority investor in Element. It will fund the acquisition with $2.975 billion of new debt, including $800 million of payment-in-kind notes from the holdco, alongside $3.985 billion of equity including rolled equity and $80 million of balance sheet cash.

“Element's business risk profile is supported by its leading position in materials and product-qualification testing. Its competitive advantage stems from strong technical expertise in subsegments of the testing, inspection, and certification (TIC) market, which are increasingly supported by regulatory and sustainability drivers. Excess funds from the transaction are intended for the acquisition of a North American laboratory-based TIC provider, which focuses primarily on testing services in North America across various end markets,” S&P said in a press release.

The outlook is stable. The agency said it expects Element will push leverage down to close to 9x by 2023 from 12x in 2022, including PIK notes and excluding any annualization for acquisitions.

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