S&P rates STG-Fairway loans B, CCC+

Standard & Poor’s said it assigned its B issue rating (the same level as the corporate credit rating) to STG-Fairway Acquisitions Inc.’s (doing business as First Advantage Corp.) proposed $485 million first-lien term loan due 2021.

S&P also assigned a B rating to the proposed $50 million revolver due 2019. The recovery rating on the revolver and the first-lien term loan is 3, indicating an expectation that lenders could expect meaningful (50%-70%) recovery in the event of a payment default or bankruptcy.

At the same time, S&P assigned a CCC+ issue rating to the $170 million second-lien term loan due 2022. The recovery rating is 6, indicating an expectation that lenders could expect negligible (0%-10%) recovery in the event of a payment default or bankruptcy.

The B corporate credit rating remains unchanged. The outlook is stable.

“Our ratings on STG reflect its significant debt burden, aggressive financial policy, and narrow business focus in a sector with low growth prospects,” S&P said in a news release.

“The company has good customer and sector diversification within the background check services industry. However, we believe pricing pressure will remain intense thanks to the highly fragmented nature of the industry and low switching costs.”

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