S&P affirms SeaStar on add-on

S&P said it affirmed the B corporate credit rating on Marine Acquisition Holdings Inc., which does business as SeaStar Solutions.

The outlook is stable.

The agency also said it affirmed the B rating on the company's proposed upsized and amended $370 million term loan B due 2021, which includes the proposed $70 million add-on. We expect the company to use proceeds from the term loan add-on to acquire a leading manufacturer of fuel tank and diurnal systems for the recreational boating market.

The recovery rating on this debt remains at 3, indicating 50% to 70% expected default recovery.

The recovery rating remains at 3 because recovery prospects for lenders are not meaningfully impaired, despite additional secured debt in the capital structure due to a higher assumed emergence valuation from the incremental EBITDA contribution from the acquisition, S&P said.

The ratings were affirmed despite the proposed incremental leverage the company would assume upon close of the transaction because it does not meaningfully impair SeaStar's financial risk, the agency said.

S&P said it views the acquisition favorably because it is a good fit that adds to SeaStar's portfolio of mission critical, engineered recreational boating components and the transaction adds modest incremental leverage compared to the previous base case forecast.

The ratings consider a view that financial sponsor-owned companies will periodically engage in debt-financed acquisitions or dividend recapitalizations, the agency said.

The ratings also reflect that increased leverage from the proposed transaction remains less than the 7x adjusted debt-to-EBITDA downgrade threshold, S&P said.

The stable outlook reflects an expectation of good revenue growth in the company's marine OEM and aftermarket channels, resulting in leverage improving to the mid-4x range in 2018, the agency said.

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