S&P ups CPI loans to B+, view stable

S&P said it revised its outlook on CPI International Inc. to stable from negative and affirmed the B corporate credit rating.

At the same time, the agency raised the issue rating on the company's revolver and first-lien term loan to B+ from B and the recovery rating to 2 from 3 (lower end of the 70%-90% range), reflecting an expectation of a substantial recovery in a default scenario.

S&P also affirmed the CCC+ issue rating and maintained the 6 recovery rating on the second-lien term loan and unsecured notes.

S&P said the outlook revision reflects its increased confidence that credit ratios will continue to improve over the next 12 months as revenues and earnings increase, despite credit ratios improving slower than expected in fiscal-year 2016.

This is expected to result in debt to EBITDA approaching 6 times by the end of fiscal 2017 (ending Sept. 29, 2017), from 6.7 times in fiscal 2016.

“The company also recently entered into a backstop facility to ensure it will be able to refinance at least 65% of its unsecured notes, which will trigger a provision in its first-lien credit agreement to extend the maturity of the revolver and first-lien term loan,” S&P said in a news release.

“This would extend the maturities on the revolver to 2019 and first-lien term loan to 2021 from later this year.”

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