S&P rates UST B+, loan BB-

S&P said it gave UST Holdings Ltd. a B+ issuer rating and BB- and 2 recovery ratings to its planned $400 million term loan. Subsidiary UST Global Inc. and others will be co-borrowers on the loan.

“The B+ issuer credit rating reflects UST's lower EBITDA margins than other IT service peers', small scale within a competitive market environment with low barriers to entry, and high customer concentration. Good top-line growth in recent years, strong relationships with customers leading to high net revenue retention over 100%, and the opportunity to expand margins over time through the build-out of its newer platforms segment offset these factors,” the agency said in a press release.

UST will use the proceeds to repay working capital facilities and term loans, with the remaining proceeds earmarked for investments.

The outlook is stable. The outlook reflects an expectation for annual revenue growth continuing in the low- to mid-teens percentage range with leveraged expected to decline to the low-3x area from the low-4x area at transaction close, Moody’s said.

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