S&P ups MTS Systems loans, rates notes B+

S&P said it assigned its B+ issue-level rating and 5 recovery rating to MTS Systems Corp.'s proposed $300 million senior notes.

The 5 recovery rating indicates an expectation for modest (10%-30%; rounded estimate: 10%) recovery in the event of payment default.

The company will use proceeds from the notes issuance to fully pay down borrowings on its revolving credit facility ($80 million outstanding as of March 31) and redeem about $214 million of its term loan B (pro forma balance estimated at $176 million post paydown as of March 31).

The agency also raised its issue-level ratings to BB from BB- and revised the recovery ratings to 2 from 3 on the company's revolver and term loan B. T

“MTS is exposed to economic cyclicality that affects the auto sector and the volatility in the oil and gas market,” the agency said in a news release.

“Our simulated default scenario assumes sales volumes to be hampered by an economic recession that results in less demand for the company's products. These factors would result in a steep decline in revenue and EBITDA.”

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