S&P rates SoftLayer loans B+

Standard & Poor's said it assigned a preliminary B+ corporate credit rating to SoftLayer Holdings Inc., a preliminary B+ issue-level rating to its $275 million senior secured credit facility and preliminary recovery rating of 3 to the facility, indicating an expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default.

The outlook is stable.

The facility consists of a $255 million term loan due 2016 and a $20 million revolving credit facility due 2015. The company plans to use the proceeds to cover costs related to the merger of SoftLayer Technologies, Inc. and ThePlanet.com Internet Services, Inc.

The agency said the preliminary ratings reflect the competitive, fragmented nature of the hosting and managed services sector as well as risks associated with SoftLayer's target customer base in the internet-centric small and midsize business market.

At the same time, S&P expects continued double-digit annual revenue growth pro forma for the merger, due to the high growth trends in IT outsourcing and managed services, and the agency said this growth expectation partially mitigates the business risks facing the company.

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