S&P rates Marcel LUX loans B

S&P said it assigned its preliminary B long-term issuer credit rating to Marcel LUX IV (SUSE), a Germany-based intermediate holding company and prospective parent of SUSE Linux, pending the successful completion of its buyout. The outlook is stable.

At the same time, S&P assigned a preliminary B issue rating to the proposed $675 million secured term loans and $81 million revolving credit facility. The recovery rating is 3, reflecting an expectation of meaningful recovery prospects (50%-70%; rounded estimate: 65%) in a default scenario.

“The rating on SUSE is primarily constrained by its highly leveraged capital structure following the leveraged acquisition and prospective ownership by EQT, which we view as the financial sponsor,” S&P said in a news release.

“The proposed capital structure reflects our forecast adjusted total gross cash-paying debt to EBITDA of about 9.0x-9.5x in fiscal 2019 (ending Oct. 31), which we consider aggressive compared with other highly leveraged peers. This is only partly offset by our forecast of 12%-15% EBITDA growth prospects, which we think will provide scope for a meaningful reduction in adjusted leverage to 8.0x-8.5x in fiscal 2020.”

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