S&P applies BB+ to Aramark notes

S&P said it assigned its BB+ issue rating to Aramark Services Inc.'s proposed $600 million senior unsecured notes due 2025 with a 4 recovery rating, reflecting an expectation for average (30%-50%; rounded estimate 40%) recovery in the event of a payment default.

The agency expects the company will use the net proceeds to repay the remainder of its 5¾% senior notes due 2020 and a portion of the term loan due 2021.

Total debt outstanding pro forma for the proposed transaction is about $5.5 billion.

All existing ratings on the company, including the BB+ corporate credit rating, BBB- senior secured debt ratings and BB+ senior unsecured note ratings, are unchanged.

The outlook is stable.

S&P said the ratings incorporate Aramark’s leading (though not dominant) position in the competitive and fragmented food and support services market and its sizable business with customers in relatively stable service segments (particularly heath care, education, and corrections), which the agency believes translates into consistent profitability.

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