S&P rates System1, loan B

S&P said it assigned preliminary B ratings to special-purpose acquisition company Trebia Acquisition Corp., to be renamed System1 Inc., and its planned $400 million term loan. The loan’s recovery rating is 3.

Trebia plans to acquire System1 and finance the deal with the term loan and equity. The remaining proceeds will be used to refinance debt, add cash to the balance sheet and prefund potential shareholder redemptions.

“The preliminary B rating reflects System1's participation in a highly competitive and fragmented industry with low barriers to entry, significant customer concentration, relatively small scale of operations, and lower EBITDA margins than peers such as Red Ventures Holdco LP and Centerfield Media Parent Inc. In addition, we believe that the company's pay-for-performance business model creates uncertainty in predicting future operating performance,” S&P said in a press release.

The outlook is stable, reflecting expectations the company will achieve low-double-digit percent pro forma EBITDA growth, resulting in S&P Global Ratings-adjusted leverage in the 5x-6x range and free operating cash flow to debt of 10%-15% in 2022, the agency said.

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