S&P lowers DAE Aviation

Standard & Poor’s said it lowered the corporate credit rating on DAE Aviation Holdings Inc. to B- from B and removed the rating from CreditWatch, where it was placed with negative implications in May.

The outlook is stable.

Veritas Capital recently completed its leveraged buyout of DAE Aviation, which caused the company’s pro forma debt-to-EBITDA metric to increase to nearly 8x from 4.7x as of the 12 months ended March 31, S&P said.

The ratings on the debt that the company used to finance the transaction, which consists of a $925 million secured term loan and $485 million of unsecured notes, are not affected as they were based on the lower rating and were not placed on CreditWatch.

The downgrades reflect the significant increase in the company’s leverage following its acquisition by funds affiliated with private equity firm Veritas Capital, S&P said.

Veritas paid about $2.1 billion for the company and financed the transaction with a $925 million term loan, $485 million of unsecured notes, $20 million of borrowings from a new $150 million asset-based lending revolver and $845 million of sponsor equity, the agency said.

The stable outlook reflects an expectation that the company’s credit ratios will gradually improve over the next 12- to 24-months, S&P said.

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