S&P rates SSH Group loans B-, CCC

S&P said it assigned its B- corporate credit rating to SSH Group Holdings Inc. (Spring Education Group), the parent company of Stratford Schools Inc.

The outlook is stable.

At the same time, the agency assigned its B- issue-level rating to the company's proposed $575 million senior secured first-lien credit facility, which consists of a $40 million revolving credit facility due 2023 and a $535 million term loan due 2025.

The 3 recovery rating indicates an expectation for meaningful recovery (50%- 70%; rounded estimate: 65%) of principal in a payment default.

The agency also assigned its CCC issue-level rating to the company's proposed $225 million senior secured second-lien credit facility. The 6 recovery rating indicates an expectation for negligible recovery (0%-10%; rounded estimate: 0%).

The company is using proceeds from the facilities to acquire Nobel Learning Communities Inc. and the schools of LePort Montessori.

S&P said the corporate credit rating reflects SSH Group’s high debt leverage, minimal cash flow, the significant share of total revenues derived from pre-K operations and the risk that it may take longer than the company expects to increase enrollment and raise prices at the acquired schools.

These risks, however, are partially offset by the company's record of consistent growth, strong brand recognition in its markets and good academic outcomes at its schools, the agency said.

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