S&P rates Ultimate Software loans B, CCC

S&P said it assigned its B issue-level and 2 recovery ratings on the Ultimate Software Group Inc.’s proposed $2.6 billion first-lien term loan add-on, and affirmed the ratings on the proposed $425 million revolving credit facility (upsized from $275 million). The 2 recovery rating indicates an expectation of substantial (70%-90%; rounded estimate: 70%) recovery in the event of default.

S&P also assigned the CCC issue-level and 6 recovery to its proposed $700 million second-lien term loan. The 6 recovery rating indicates an expectation of negligible (0%-10%; rounded estimate: 0%) recovery in the event of default. The existing $900 million privately placed second-lien term loan remains unrated.

The proceeds will be used, along with cash on hand, to repay in full Kronos Inc.’s outstanding debt of $3.381 billion, which Ultimate acquired on April 1.

“We estimate the transaction increases Ultimate’s 2020 leverage to the mid-13x area, around 0.5x higher than our forecast from April 2020. Although our EBITDA forecast is unchanged, the revolver balances at Kronos ($95 million) and Ultimate ($245 million) are $320 million higher than we previously forecast, resulting in the slightly higher leverage forecast,” S&P said in a press release.

Ultimate’s other ratings are unchanged, S&P said.

The outlook is stable.

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