S&P cuts Generac loan

S&P said it lowered Generac Power Systems Inc.'s senior secured term loan B rating to BB+ from BBB- and revised its recovery rating to 3 from 2. The 3 recovery rating indicates meaningful (50%-70%; rounded estimate: 65%) recovery in default.

The downgrade follows Generac's getting a new, unrated $1.25 billion senior secured revolving credit facility, undrawn at close, and an unrated $750 million senior secured term loan A, the agency said.

“In our view, the larger amount of secured debt reduces the recovery prospects for secured creditors in the event of a hypothetical default,” S&P said in a press release.

The company used the term loan proceeds to pay down and retire the company's asset-based lending facility, which had $285 million drawn, to pay down the term loan B facility by $250 million and add about $200 million to balance sheet cash after fees and expenses.

“We believe this transaction has boosted Generac's liquidity profile, which we continue to assess as strong, and provides capacity for potential future acquisitions and/or other cash outflows for general corporate purposes,” S&P added.

The agency left Generac’s BB+ issuer rating and stable outlook unchanged.

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