S&P ups Aramark, rates loan BBB-

S&P said it raised its ratings on Aramark and its senior unsecured debt to BB from BB- and BB- from B+. The 5 recovery rating on the debt is unchanged. The agency also assigned BBB- issue-level and 1 recovery ratings to the company’s planned seven-year term loan. The 1 recovery rating indicates very high (90%-100%; rounded estimate: 95%) recovery in default.

“The upgrade reflects Aramark's continuing operating performance gains and improving credit protection metrics. Aramark posted significant growth during the fiscal second quarter (ended March 31, 2023), with revenue increasing 19% driven by net new business, growing base business volume, and higher pricing. Its operating income increased nearly 30% as reduced supply chain pressures and other cost benefits lifted margins on the substantially higher sales levels,” the agency said in a press release.

The new term loan will help pay down the company's remaining $1.1 billion term loan due 2025. Aramark repaid $468 million of this loan in April using proceeds from the sale of its 50% interest in AIM Services Co. The company also recently repaid an added $100 million using proceeds from the partial sale of its minority ownership stake in the San Antonio Spurs basketball team.

The outlook is stable.

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