S&P rates Gogo notes B-, convertibles CCC

S&P said it assigned a B- corporate credit rating to Gogo Inc.

The agency also said it assigned a B- rating and 3 recovery rating to the company’s proposed $500 million senior secured notes. The 3 recovery rating indicates 50% to 70% expected default recovery.

S&P also said it assigned a CCC rating and 6 recovery rating to the company’s existing $362 million senior unsecured convertible notes due 2020. The 6 recovery rating indicates 0 to 10% expected default recovery.

The outlook is negative.

The B- rating on Gogo primarily reflects its very high pro forma leverage of about 10x and an expectation of negative free operating cash flow for the next few years, S&P said.

These factors are tempered by the company’s adequate liquidity position, which pro forma for the proposed transaction will consist of $506 million in cash balances, the agency said.

The negative outlook reflects risks concerning the company’s international growth plans and an expectation that ongoing capital expenditures from expansion activity will diminish the company’s current cash balance, S&P explained.

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