S&P cuts Service King

S&P said it cut its ratings for SK Holdco LLC (Service King) and its senior secured debt to CC from CCC- after the company reported it agreed to a transaction support agreement with a consortium of its creditors to complete a balance sheet restructuring. The recovery rating on the secured debt remains 3 and indicates a meaningful recovery (50%-70%; rounded estimate: 55%). Concurrently, the agency affirmed the senior unsecured notes at C. The recovery rating remains 6, indicating a negligible recovery (0%-10%; rounded estimate: 0%).

“We view the restructuring as tantamount to a distressed exchange given that creditors will receive less than full value as promised at origination, despite the transaction reducing Service King's debt burden by $500 million and the TSA providing a new cash infusion of at least $130 million,” S&P said in a press release.

The first-lien creditors’ approval is required to execute the TSA, which the majority have approved, the agency said.

The outlook is negative.

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