S&P rates Hargray loan B+

S&P said it affirmed the B+ corporate credit rating on Hargray Holdings LLC.

The outlook is stable.

The agency also said it assigned a B+ rating and 3 recovery rating to the company's proposed $450 million seven-year senior secured term loan.

The 3 recovery rating indicates 50% to 70% expected default recovery.

Hargray Communications Group Inc., which is a wholly owned subsidiary of Hargray Holdings, is being acquired by the business interests of Thomas J. Pritzker's family (PFBI) and other investors for an undisclosed amount, S&P explained.

As part of the transaction, Hargray is seeking to refinance its existing debt with senior credit facilities comprised of a $30 million revolving credit facility (undrawn) and $450 million senior secured term loan, the agency said.

Hargray will use the $450 million of term loan proceeds, along with equity invested from the Pritzer organization-led investor group, to fund the purchase price of the acquisition and related transaction fees.

S&P said it will withdraw the ratings on Hargray's existing senior secured debt after the transaction closes.

With the acquisition and concurrent recapitalization, the agency said it expects a modest increase in adjusted debt leverage.

Pro forma for the transaction, S&P said it predicts leverage of about 5.7x by year-end 2017, which remains consistent with expectations for the current rating.

The ratings reflect an opinion that Hargray's adjusted leverage will remain in the 5x- to 6x-range while free operating cash flow-to-debt will remain at less than 5% over the next 12 months, the agency said.

Growth in residential and commercial data revenues are expected to offset lower growth in video and declining access-line trends, S&P said.

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