S&P rates Merrill loan B

Standard & Poor's said it revised its outlook for Merrill Corp. to positive from stable. At the same time, S&P assigned its B rating and recovery rating of 3 to the proposed $200 million senior secured credit facility being borrowed by Merrill Communications LLC, a subsidiary of Merrill Corp.

At the same time, S&P affirmed its B corporate credit and senior secured debt ratings and its CCC+ subordinated debt rating for Merrill.

Proceeds from the proposed bank facility will be used to refinance existing bank debt, to repay the company's senior discount notes, and to pay fees and expenses.

S&P said the outlook revision reflects Merrill's steadily improved operating results during the last several quarters, resulting in a strengthening of credit measures. In addition, it is S&P's expectation that this trend is likely to continue in the near term.

According to S&P, the ratings on Merrill reflect the company's significant debt levels, moderate-size cash flow base, and competitive market conditions in the overall print sector. In addition, the company's transaction-based financial printing business is subject to the volatility of the capital markets. These factors are somewhat offset by Merrill's good market position in financial printing and a diversified customer base. Also, the company's increasing focus on diversifying its business, most notably through its document management and real estate segments, is expected to help provide more stable revenues and cash flows, which likely will help offset the variability of capital markets-related printing.

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