S&P rates Spruce, loan B

S&P said it gave B ratings to Spruce Power Holdings LLC and its planned $600 million term loan B. The loan’s recovery rating is 4, indicating an expectation of expectation of average (30%-50%; rounded estimate: 40%) recovery in default.

“We consider Spruce's financial metrics as highly leveraged at about 10x in 2022, only modestly declining to about 9x by 2024. This modest improvement is largely spurred by the TLB cash sweep, as EBITDA is projected to gradually decline due to seasoning of the contracts and system degradation. We would view those credit metrics as being weaker than most peers. The repayment structure of the TLB is also somewhat weaker than that of peers, with a requirement to sweep 50% of excess cash flow for year one to four and 75% thereafter, as well as the standard 1% mandatory amortization,” S&P said in a press release.

Spruce plans to use the proceeds to repay some of its outstanding debt, pay a dividend, fund restricted cash and pay associated transaction costs.

The outlook is stable.

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