S&P rates Ginsberg B

S&P said it gave Ginsberg HoldCo Inc. (Gigamon) a B rating and upgraded the rating on Gigamon Inc., the borrower, to B from B-, and the issue-level ratings on the company's first-lien credit facilities to B from B-.

“We expect Gigamon will continue to maintain leverage below 6.5x after steadily deleveraging since it was taken private in 2017. Despite significant investments in sales and marketing in recent years, Gigamon has been able to improve its EBITDA margins to the 20% area while achieving a compound annual growth rate of about 6% from 2017 to 2020. This has resulted in leverage declining to a lower-than-expected 6.3x as of Dec. 31, 2020,” S&P said in a press release.

The agency said it forecasts Gigamon to generate FOCF of $40 million-$50 million in 2021 with help from its term loan repricing in February that saves about $2.7 million in annual cash interest payments.

“Furthermore, the company fully repaid the $15 million outstanding balance on its revolving credit facility (RCF) in the first quarter of the year. In addition to modest capital expenditures (capex) of 2%-3% of revenues, we expect FOCF to debt will improve to the mid-to high-single-digit percent area in 2021, which is consistent with the B rating,” S&P said.

The outlook is stable.

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