S&P rates Cardtronics notes B, view to negative

S&P said it revised the outlook on Cardtronics plc to negative from stable and affirmed its BB+ corporate credit rating.

The agency also said it assigned a BB+ rating and 4 recovery rating to the company's proposed $300 million senior unsecured notes due 2025.

The 4 recovery rating indicates 30% to 50% expected default recovery.

Cardtronics plc plans to issue the notes through its subsidiaries, Cardtronics USA, Inc. and Cardtronics, Inc., to partially pay down its revolver, which it used to fund the recently closed acquisition of DirectCash Payments Inc., S&P explained.

In conjunction with the offering, the company will amend its credit facility to increase the size of the revolver to $400 million from $375 million, exclusive of temporarily increasing the revolver to $600 million to help fund the acquisition, the agency said.

Cardtronics also announced its 2017 financial guidance incorporating the termination of its largest ATM contract with 7-Eleven, S&P said, and that it expects the associated ATMs will be removed over the second half of 2017.

The company also re-domiciled to the United Kingdom, so the agency said it assigned a corporate credit rating of BB+ with negative outlook to the new parent, Cardtronics plc.

S&P also said it revised the recovery rating on the existing senior unsecured notes to 4 from 3 given the additional unsecured debt in the capital structure. The 4 recovery rating indicates 30% to 50% expected default recovery. The agency also said it affirmed the BB+ ratings on those issues.

The agency also said it affirmed the BBB- rating on the first-lien revolver. The recovery rating is 1, indicating 90% to 100% expected default recovery.

The outlook change reflects a view that leverage could approach 3x in 2018 through EBITDA decline from the high-2x range at the end of 2016, S&P explained.

The agency said it expects most of the lost 7-Eleven ATMs EBITDA will be replaced through the acquisition of DirectCash, along with cost-cutting initiatives.

The ratings also consider the company's leading U.S. market position, recurring revenue base and improving geographic diversification and customer concentration, the agency added.

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