S&P rates Lereta, loans B-

S&P said it assigned B- ratings to Lereta LLC and its planned new capital structure which includes a $30 million senior secured revolving credit facility, undrawn at close, and a $250 million senior secured term loan. The loans’ recovery rating is 3.

Flexpoint Ford and Vestar Capital Partners are acquiring the company.

“Lereta is exposed to the cyclicality in the mortgage market, and rising interest rates could hinder revenue growth. We estimate about one-third of revenue for the Lereta is tied to residential mortgage refinancing volumes, one-third comes from residential mortgage purchasing volumes, and the remaining one-third comes from other services such as commercial mortgage, reverse mortgage, and tax outsourcing,” the agency said in a press release.

The outlook is stable. The outlook reflects an expectation for adjusted leverage between 5x – 7x and adequate levels of liquidity over the next year. “However, we anticipate lower refinancing volumes will result in organic revenue declines of up to 2%. We are forecasting Lereta's leverage will be in the high-5x area in 2021 ticking above 6x in 2022, because of lower mortgage origination and increased technology spend,” S&P said.

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