S&P rates Hornblower, American Queen loan B+

S&P said it assigned a B+ rating and 2 recovery rating to Hornblower Sub LLC's and American Queen Sub LLC's $42.5 million incremental term loan B-1 due 2020.

The 2 recovery rating indicates 70% to 90% expected default recovery.

Hornblower Sub and American Queen Sub are direct subsidiaries of Hornblower HoldCo LLC and are the borrowers under the credit facility.

The proceeds from the incremental term loan, along with cash on hand, will be used to fund the acquisition of two vessels, the Victory I and Victory II, to add to its American Queen overnight cruise segment, S&P explained.

The acquisition of these vessels provides American Queen the ability to service new markets, including the Great Lakes region, the agency said.

In our view, the addition of these vessels to the portfolio supports a higher assumed emergence valuation and this increased valuation largely offsets the additional term loan B debt in the simulated hypothetical default scenario, S&P said.

The company should have sufficient liquidity to repay this short-dated maturity through revolver availability, cash flow generation and cash proceeds it will receive from the sale of its NYC ferry vessels to NYC, the agency said.

Pro forma for the acquisition, S&P said it expects Hornblower's leverage to remain in the low- to mid-4x range in 2019.

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