S&P lowers SGS, rates loan B, notes CCC+

Standard & Poor's said it lowered the corporate credit rating on SGS International Inc. to B from B+ and removed all ratings from CreditWatch, where they were placed with negative implications Sept. 5 following news that the company signed a definite agreement to be acquired by Onex Partners.

The outlook is stable.

S&P also assigned a B corporate credit rating to Southern Graphics Inc., along with a B rating on its proposed $450 million first-lien credit facilities. The recovery rating on this debt is 3, indicating 50% to 70% expected recovery in a default.

The proposed facility will consist of a $75 million revolving credit facility due 2017 and a $375 million term loan due 2019.

The agency also assigned a CCC+ rating to Southern Graphics' proposed $200 million unsecured notes due 2020. The recovery rating on this debt is 6, indicating 0% to 10% recovery in a default.

The proceeds will be used toward the $813 million acquisition price and pay for fees and expenses.

The outlook is stable.

The downgrade reflects a view that higher debt and interest expense associated with Onex's acquisition of SGS will weaken the company's financial profile, S&P said, and increase lease-adjusted pro forma debt leverage to the high-6x area.

The ratings consider an expectation that the company's financial profile will be highly leveraged because of its private-equity ownership and substantial leverage, the agency said.

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