S&P rates Virgin Pulse B-

S&P said it assigned Virgin Pulse (Red IntermediateCo LLC) and its planned first-lien credit facility B- ratings. The facility will consist of a $65 million revolving credit facility due 2026 and a $505 million first-lien term loan due 2028. The recovery rating is 3.

The agency also gave CCC and 6 recovery ratings to Virgin Pulse’s expected $185 million second-lien loan.

“Our rating on Virgin reflects its high leverage, small scale, and discretionary nature of the product, offset by its high net retention rates (over 100%) and 87% recurring revenues under multiyear contracts, which provided good visibility and enabled good free operating cash flow (FOCF) in the low-$30 million area in 2020,” S&P said in a press release.

The outlook is stable. “The stable outlook reflects Virgin's strong net retention rates and stable S&P Global Ratings-adjusted EBITDA margins in the mid-20% area, which should enable continued revenue growth and good FOCF levels,” the agency said.

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