Moody’s gives B2 to Recess loan

Moody’s Investors Service said it gave a B2 rating to Recess Holdings Inc.’s planned $1.05 billion first-lien senior secured term loan due 2030.

Concurrently, the agency said it affirmed the B2 ratings on Recess and its outstanding first-lien senior secured term loan due 2027. Recess is also extending the expiration on the $125 million asset-based lending revolving credit facility by three years to September 2029.

Recess plans to use the new loan and $58 million in cash to repay its $640 million first-lien term loan and distribute $450 million to Court Square and other shareholders. The rest will go towards paying transaction-related fees.

“The transaction is credit negative because it increases the company's debt burden to fund a shareholder distribution and the step-up in interest expense of around $35 million-$40 million (Moody's estimates) will reduce free cash flow. Moody's expects debt to EBITDA will increase to around 4.5x pro forma for the transaction from 2.7x (Moody's adjusted for the last 12 months ended September 2023),” the agency said in a press release.

The outlook is stable.

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