S&P upgrades Aramark

S&P said it raised the corporate credit rating on Aramark Corp. to BB+ from BB.

The outlook is stable.

The agency also said it we affirmed the BBB- rating on the company's existing senior secured credit facilities. The 1 recovery rating is unchanged, indicating 90% to 100% expected default recovery.

S&P also said it raised the rating on the company's senior unsecured debt to BB+ from BB- and revised the recovery rating to 4 from 5. The 4 recovery rating indicates 30% to 50% expected default recovery.

The agency also said it assigned a BBB- rating and 1 recovery rating to the company's proposed $3.6 billion senior secured credit facility, which includes a $1 billion multi-currency revolver due 2022, $100 million term loan due 2022, $650 million term loan A due 2022, $100 million Japanese term loan due 2022 and $1.75 billion term loan B due 2024.

The 1 recovery rating reflects 90% to 100% expected default recovery.

Pro forma for the transaction, the agency said it estimates total debt outstanding of about $5.5 billion.

The agency said it will withdraw the ratings on the existing senior secured credit facilities once the transaction closes and the debt is repaid, S&P said.

The borrower of the existing senior secured debt is Aramark Services Inc.

The upgrades reflect an expectation that Aramark's profitability will continue to grow due to new business wins, productivity initiatives and strong retention rates, which would result in strong free cash flow generation, the agency said.

This would allow the company to further strengthen its credit ratios, including its debt-to-EBITDA ratio improving to the mid-3x range in fiscal 2017, S&P said.

The agency also said it revised the recovery rating on the existing senior unsecured debt because there will be less senior secured debt after the transaction closes, resulting in more available asset value for the senior unsecured debt.

The corporate credit rating on Aramark considers the company's leading – though not dominant – position in the competitive and fragmented food and support services market, S&P said.

The ratings also consider its sizable business with customers in relatively stable service segments, high client retention rates and moderate geographic diversity, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.