S&P assigns B to Hub $4.25 billion loan

S&P said it assigned B issue and 3 recovery ratings to Hub International Ltd.’s planned $4.25 billion term loan. The 3 rating indicates meaningful recovery (50%-70%; rounded estimate: 50%) if Hub defaults.

Concurrently, the agency raised the rating on Hub’s senior unsecured notes due 2026 and 2029 to B- from CCC+, because it expects modest recovery (10%-30%; rounded estimate: 10%) in default from a negligible recovery of about 5% previously. S&P also affirmed Hub’s B issuer rating.

The loan is expected to be used to refinance debt, fund pipeline acquisitions and for deal expenses.

“We expect a sizable increase in interest expense through 2024 for the company's variable-rate debt, which represents about 50% of its capital structure following the transaction (excluding hedges expiring in 2024). Also, the company plans to extend the maturities of its $500 million and C$130 million revolving credit facilities to June 2028 from January 2025 and increase the U.S. dollar facility by $200 million. Hub's balance sheet is highly leveraged and credit-protection metrics are weak, stemming primarily from the company's acquisitive (and debt-intensive) growth strategy,” the agency said in a statement.

The outlook is stable.

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