S&P rates Balrog B-

S&P said it gave a B- issuer rating to Balrog Acquisition Inc. Balrog will become the new parent company of BMark Topco Inc. (BakeMark).

The agency also assigned B- issue-level and 3 recovery ratings to its first-lien term and CCC issue-level and 6 recovery ratings to the second-lien term loan. The 3 recovery rating indicates expectations for meaningful (50%-70%; rounded estimate: 55%) recovery in default. The 6 recovery rating indicates expectations for negligible (0%-10%; rounded estimate: 0%) recovery in default.

ClearLake Capital is buying the company from Pamplona Capital Management.

“The sponsor is investing common equity and raising payment-in-kind (PIK) preferred shares from outside investors. Given the terms of the preferred shares, we view them as having minimal equity content and treat them as 100% debt. Therefore, we estimate BakeMark's pro forma 2021 debt leverage will be about 9x (8x without the preferred equity). We view this level of leverage as very high and expect the company will pay down its debt with excess cash to reduce its leverage to the 8x area (closer to 7x excluding the preferred shares) by the end of fiscal year 2022,” S&P said in a press release.

The outlook is stable.

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