S&P applies BB- to ADT notes

Standard & Poor's said it assigned its BB- issue-level rating to ADT Corp.'s new $400 million senior unsecured notes with a recovery rating of 3, indicating an expectation of meaningful (50%-70%) recovery in the event of a payment default.

Proceeds will be used primarily to repay the outstanding amount under ADT's revolving credit facility and for general corporate purposes.

The agency expects that the company will continue to use a combination of free cash flow and additional debt to finance shareholder returns, such that reported leverage is 3 times (corresponding to S&P’s adjusted leverage in the mid- to high-5 times area).

The BB- corporate credit rating on ADT is indicative of its "satisfactory" business risk profile and "highly leveraged" financial risk profile. Pro forma for the proposed issue, S&P’s adjusted leverage as of Sept. 26 will be around 5 times, the agency said.

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