Fitch trims Sophos loan to B-

Fitch Ratings said it changed the rating on Surf Intermediate I Ltd.’s (Sophos) first-lien secured facilities to B-/RR4/49% from an expected B/RR3/53% following the upsizing of the company's term loan B by $100 million to $1.53 billion. The company also downsized its second-lien loan by the same amount so that the total amount of debt remains unaffected.

The change in the debt composition, as well as lower-than-initially expected coupons, will have a moderately positive impact on cash flows and leverage due to lower interest expenses, but the leverage profile is expected to remain consistent with an issuer default rating of B-, which was Sophos’ expected rating, the agency said.

Fitch said it believes the private equity ownership of Sophos could limit deleveraging as its equity owners seek to optimize return on equity (ROE). Fitch forecasts gross leverage to remain over 7x and funds from operations (FFO) adjusted gross leverage to decline to below 7x by financial year to March 2023 through organic growth and cost efficiency improvements. Sophos' operating and leverage profiles are consistent with the B- IDR,” said Fitch in a press release.

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