S&P rates TKC loans B, CCC+

S&P said it assigned its B corporate credit rating to TKC Holdings Inc.

The outlook is stable.

At the same time, the agency assigned a B issue-level rating to the company's senior secured $50 million revolving credit facility due 2022 and $1.05 billion senior secured first-lien term loan due 2023, and a CCC+ issue-level rating to its $300 million senior secured second-lien term loan due 2024. The recovery rating on the revolver and first-lien term loan is 3, indicating an expectation for meaningful (50% to 70%, at the upper half of the range) recovery in the event of a default. The recovery rating on the second-lien term loan is 6, indicating an expectation for negligible (0% to 10%) recovery in the event of a default.

Pro forma for transaction, the agency expects the company will have about $1.35 billion in reported debt outstanding.

S&P said the ratings reflect TKC's weak credit metrics and meaningful integration risk associated with the merger of Keefe Group Holdings and Trinity Services to form TKC as the largest provider of commissary services to the corrections industry.

"We believe TKC should be able to capture significant cost synergies through warehouse consolidation, headcount reductions, and increased purchasing power," S&P Global Ratings analyst Brennan Clark said in a news release.

"However, any integration missteps could cause the company to deviate materially from our expectations, particularly given the transformational nature of the merger."

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