S&P gives BBB Industries, loans B-

S&P said it assigned B- ratings to Burgess Point Purchaser Corp. (BBB Industries LLC) and its planned $100 million cash flow revolver, undrawn at close, and $1.19 million first-lien term loan. The recovery rating for the debt is 4, indicating average (30%-50%; rounded estimate: 35%) recovery in default.

The company plans to borrow $1.545 billion of debt to help fund its leveraged buyout by Clearlake Capital Group LP, refinance existing indebtedness, and pay transaction fees and expenses. Additionally, BBB plans to obtain a $100 million asset-based lending facility, undrawn at close, and a $355 million second-lien term loan.

S&P said it will withdraw the ratings on former borrower GC EOS Buyer Inc. and its debt following the deal’s close and repayment of the debt.

“Although leverage will increase after the transaction, we expect free cash flow generation to improve modestly, though EBITDA margins could be pressured by inflation. Pro forma for the completion of the leveraged buyout by Clearlake Capital, adjusted leverage for the 12 months ended March 31, 2022, will increase to about 8.6x from 6.6x under the previous capital structure and sponsor. While we expect input, freight and labor inflationary costs will continue pressuring EBITDA margins, we believe BBB's pricing actions should largely offset these impacts,” the agency said in a press release.

The outlook is stable reflecting a forecast that BBB will keep EBITDA margins close to 20% while delivering free cash flow, S&P said.

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