S&P rates SBHC B-, loans B-, CCC

S&P said it assigned B- ratings to SBHC Holdings LLC and its planned $75 million first-lien revolving credit facility, undrawn at close, $450 million first-lien term loan, and $70 million first-lien delayed-draw term loan,. The agency also gave a CCC rating to its proposed $180 million second-lien term loan and $25 million second-lien delayed-draw term loan. The recovery rating on the first-lien debt is 3, indicating an expectation of meaningful (50%-70%; rounded estimate: 65%) recovery in default and 6 on the second-lien, reflecting an expectation for negligible (0%-10%; rounded estimate: 0%) recovery.

Patient Square Capital agreed to acquire SBHC in a debt- and equity-funded deal.

“We expect a highly leveraged financial risk profile with adjusted debt to EBITDA of 8x-9x and discretionary cash flow to debt of less than 3% in 2022 and 2023.We expect SBHC to remain highly leveraged throughout our forecast period. Given its ownership by a financial sponsor, we expect the company to prioritize growth and shareholder rewards over debt reduction. Its growth strategy focuses on acquisitions and de novo facilities, to supplement organic growth. They likely require financing with both additional debt and internally generated cash flow,” S&P said in a press release.

The outlook is stable.

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