S&P assigns Simon & Schuster, loans B

S&P said it assigned B ratings to Simon & Schuster (Century DE Buyer LLC) and its planned first-lien senior secured term loan and revolver. The recovery rating on the loans is 3. The outlook is stable.

KKR & Co. is buying the company for $1.6 billion, including the planned $1.1 billion loan due 2030.

“Simon & Schuster's leverage and cash flow support the B rating but ratings upside may be limited by a potentially aggressive financial policy. Post carveout, we expect year-end 2023 S&P Global Ratings-adjusted debt to EBITDA to be about 5.5x, with slight improvement to the low-5x area in 2024. We expect 2023 revenue declines of 3%-4% will reflect normalizing sales, following significantly above-trend growth stemming from the success of one author that drove significant 2022 revenue.

“We believe Simon & Schuster will increase overall revenues in 2024 by about 2% and will continue generating healthy positive FOCF although higher interest expense associated with new debt will likely reduce FOCF-to-debt to around 6%-8% from about 10% in 2023,” S&P said in a press release.

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