S&P gives B to Vaco, facility

S&P said it gave B ratings to Vaco Holdings LLC and its planned $600 million first-lien term loan facility. The recovery rating on the facility is 3, indicating an expectation for meaningful (50%-70%; rounded estimate 55%) recovery in default.

“The issuer credit rating reflects Vaco's small scale in a highly fragmented market compared to larger peers, limited revenue visibility, concentration in the U.S., moderate client concentration, and niche focus. These challenges are somewhat offset by favorable renewal rates and a diversified base of professional offerings including its consulting business that specifically targets the IT and finance/accounting verticals, a unique offering for the staffing industry,” S&P said in a press release.

Vaco plans to use the loan to recapitalize. The agency said it forecasts the company’s S&P Global Ratings' adjusted leverage to remain around 5x. At Sept. 30, Vaco’s S&P Global Ratings adjusted leverage was in the 2x area.

“In the nine months ending Sept. 30, 2021, the company increased its revenue by one-third and EBITDA by more than 2x on strong demand for its IT staffing and consulting services, as well as its good cost management and flexible cost structure amid the remote work requirements stemming from the pandemic-driven travel restrictions,” the agency noted.

The outlook is stable.

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