S&P cuts Cegid, rates loans B+

S&P said it lowered its ratings on Claudius Finance Parent Sarl (Cegid) and on its €75 million revolving credit facility and outstanding €880 million first-lien term loan to B+ from BB-. The recovery ratings on the loans are 3 (65%). Cegid plans to secure a €700 million first-lien term loan and a €50 million revolver. It assigned B+ and 3 recovery ratings.

The company also plans to obtain a €400 million holding company payment-in-kind facility and to use the proceeds, after transaction fees, and the €700 million first-lien term loan for a dividend distribution.

“The announced dividend recapitalization will lead to a peak in leverage in 2023, but we expect the company to reduce debt through EBITDA growth thereafter. We expect that following the transaction our adjusted leverage for Cegid will increase to 7.5x in 2023 (6.1x excluding the PIK facility) from about 4.4x in 2022 pro forma for the acquisitions.

“We forecast leverage to swiftly decline to about 6.5x in 2024 (5.2x excluding the PIK facility) and further decline below 6x (less than 5x excluding the PIK facility) in 2025, thanks to continued strong demand for "software as a service" (SaaS) solutions and solid profitability of 35%-38%, supported by the scalability of the SaaS offering, operating leverage, and efficient cost management and cost synergies,” S&P said in a press release.

The outlook is stable.

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