S&P rates Knowledge Universe loans B, CCC+

Standard & Poor’s said it assigned a B corporate credit rating to KC Mergersub Inc., the new indirect parent company of Knowledge Universe Education LLC.

The outlook is stable.

The agency also said it assigned a B rating and 3 recovery rating to KC Mergersub’s first-lien credit facility, which consists of a $645 million term loan due 2022 and an $80 million revolver due 2020.

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 $200 million second-lien term loan due 2023.

The 6 recovery rating indicates 0 to 10% expected default recovery.

The agency also said it affirmed the ratings on Knowledge Universe, including the B corporate credit rating, and removed them from CreditWatch, where they were placed with negative implications July 10.

The outlook is stable.

The proceeds of the credit facilities, as well as new equity contributions, will be used to facilitate an acquisition of Knowledge Universe.

The first-lien credit facilities that Knowledge Universe issued will be repaid as part of the transaction, S&P said.

The ratings reflect the company’s high debt leverage and participation in the cyclical early-childhood education market, the agency said.

Adjusted debt leverage will be in the low-7x range when the transaction closes and annual cash interest payments will roughly double, S&P said.

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