S&P gives Franchise loans BB, B-

S&P said it assigned Franchise Group Inc.’s proposed first out $750 million term loan a BB with a 1 recovery rating, its planned $250 million last out loan a B- with a 6 recovery rating and a B- with a 6 recovery rating to its planned $300 million of unsecured debt.

Proceeds will be used to refinance Franchise’s capital structure and fund the purchase of Pet Supplies Plus.

“We believe this acquisition will contribute to the company's revenue and EBITDA base and increase its portfolio diversification. In addition, the acquisition increases FRG's franchise bases, leading to a pro forma franchise base post-transaction of 67%. We view this as a positive credit factor, given the predictable stream of cash flow from royalties,” S&P said in a press release.

The agency affirmed the company’s B+ issuer rating and the outlook remains stable.

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