S&P assigns Turning Point notes BB

S&P said it assigned Turning Point Brands Inc.’s planned $250 million of senior secured notes due 2026 BB with a 1 recovery rating. The 1 recovery rating indicates expectations for very high (90%-100%, rounded estimate 95%) recovery in default.

The company will use the proceeds to refinance its term loan and add cash to the balance sheet.

The agency also affirmed Turning Point’s B+ issuer rater and revised the outlook to stable from negative.

“The outlook revision reflects the better than expected operating performance and our expectation for deleveraging to the mid-4x area by the end of 2021. We estimate pro forma leverage will increase to the mid-5x area from about 4x we forecast at the end of 2020, including the Premarket Tobacco Product Application (PMTA) cost. Nevertheless, we expect the company will reduce adjusted leverage to the mid-4x area over the next 12 months through a combination of growth in the core tobacco businesses, profit contribution from acquisitions, cost initiatives and lapping the one-time PMTA cost,” S&P said in a press release.

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