S&P rates Meritas loans B, B-

Standard & Poor's said it assigned a B corporate credit rating to Meritas Schools Holdings LLC and a B rating to the proposed $135 million first-lien secured credit facilities comprising a $125 million term loan and a $10 million revolver, with a recovery rating of 3, indicating expectation of 50% to 70% recovery.

The agency also assigned a B- rating to the proposed $65 million second-lien credit facility, with a recovery rating of 5, indicating expectation of 10% to 30% recovery.

The outlook is negative.

Proceeds will be used to refinance debt and build cash to provide financial flexibility.

"The corporate credit rating reflects our expectation of near-term EBITDA growth and positive discretionary cash flow, permitting gradual reduction of the company's high debt leverage," S&P analyst Chris Valentine said in a statement.

The negative outlook reflects expectation that the covenant cushion will remain tight in the near term and the company will have minimal flexibility if operating trends weaken, according to the agency.

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