S&P gives Gates Global loan B+, notes B

Standard & Poor's said it assigned its B+ corporate credit rating to Gates Global LLC.

At the same time, the agency assigned its B+ issue rating and 3 recovery rating to the company's proposed $2.8 billion senior secured term loan (which includes a €200 million tranche) and its $125 million cash flow revolver (undrawn at closing). The 3 recovery rating indicates an expectation for meaningful recovery (50%-70%) in a payment default scenario.

In addition, S&P assigned a B issue rating and 5 recovery rating to the proposed $1.4 billion of senior unsecured notes (which includes a €235 million tranche). The 5 recovery rating indicates an expectation for modest recovery (10%-30%) in a payment default scenario.

The company will use the debt proceeds along with equity contributions from the new sponsor to fund the acquisition. The transaction also includes a $325 million asset-based revolver (unrated) that would be undrawn at close.

S&P said the ratings on Gates incorporate aggressive financial policies associated with ownership by its new private equity sponsor, Blackstone.

"Given the very high leverage and lack of track record under the new owner we have limited reasons to believe that debt to EBITDA will fall below 5x in the next 2 years," S&P credit analyst Nishit Madlani said in a news release. "Our assessment also incorporates overarching risks involved with private equity ownership, and that we would closely monitor actions such as significant shareholder distributions or large debt-funded acquisitions. Blackstone has pursued an aggressive financial strategy with other portfolio entities, using debt and debt-like instruments to maximize shareholder returns, in the past."

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