S&P lowers SIWF Holdings, rates loans B-

S&P said it lowered its ratings on SIWF Holdings Inc. to B- from B.

S&P also assigned its B- issuer credit rating to the initial borrower, Sunset Debt Merger Sub, Inc., and subsequent to acquisition close, SWF Holdings I Corp., the proposed borrower of the debt facilities and the entity where S&P believes the group's consolidated financial statements will be issued post transaction close.

The outlook is stable.

At the same time, S&P said it assigned its B- issue-level and 3 recovery rating to the company's proposed senior secured first-lien credit facilities. The 3 recovery rating indicates an expectation for meaningful (50%-70%; rounded estimate: 50%) recovery in the event of payment default.

Clearlake Capital Group LP has entered into a definitive agreement to acquire SIWF Holdings Inc. (Springs Window Fashions) from AEA Investors and British Columbia Investment Management Corp. (BCI).

The transaction will be financed with a proposed $1.625 billion first-lien term loan due 2028, $625 million of junior debt, and equity contributions. The proposed transaction also includes an $150 million asset-based lending credit facility due 2026 and $125 million revolving credit facility due 2026 (both undrawn at close).

Pro forma for the new capital structure which includes approximately $1 billion of incremental debt from the company's current debt load, S&P estimates last-12-months ended June 30, 2021 leverage will increase to 7.3x (from 3.7x) with further deterioration to mid-8x area by the end of the year.

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