S&P rates Fort Dearborn loans B-, CCC

S&P said it assigned a B- corporate credit rating to Fort Dearborn Holding Co. Inc.

The outlook is stable.

The agency also said it assigned a B- rating and 3 recovery rating to the company’s proposed secured first-lien bank facility and CCC rating and 6 recovery rating to its proposed secured second-lien bank facility.

The 3 recovery rating indicates 50% to 70% expected default recovery. The 6 recovery rating indicates 0 to 10% expected default recovery.

Both facilities were borrowed under financing subsidiary Fortress Merger Sub Inc., which is expected to eventually merge into Fort Dearborn Holding Co. Inc.

The facilities comprise a $75 million revolving facility due 2021, $455 million first-lien term loan due 2023 and $170 million second-lien term loan due 2024.

The ratings reflect the company's very high debt leverage at the outset of this transaction, along with a concern that its new financial sponsor, Advent International, will impose aggressive financial policies over the intermediate term, S&P explained.

The company's adjusted debt-to-EBITDA ratio is expected to be greater than 7.5x by the end of 2016, which is higher than the debt leverage of many other financial sponsor-owned companies in the packaging sector, the agency said.

This weakness is partially offset by the company's solid free cash generation and fixed charge coverage, participation in the recession-resistant food, beverage and personal care markets and its satisfactory profitability with the potential for operational improvements, S&P said.

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