S&P rates Guidehouse loans B-, CCC, cuts ratings

S&P said it assigned a B- issue-level rating to Guidehouse LLP’s new first-lien term loan with a 3 recovery rating and a CCC issue-level rating with a 6 recovery rating to the new second-lien term loan.

Guidehouse plans to finance the acquisition of Navigant Consulting Inc. for about $1 billion with a new $640 million first-lien incremental term loan, a new $200 million second-lien incremental term loan, new cash equity from its sponsor, and cash, S&P said.

Guidehouse also plans to boost its current revolver to $125 million from $50 million, to provide added liquidity for the larger company, but S&P said it expects it to stay undrawn.

The agency, however, sees the acquisition as delaying the improvement in the company’s leverage beyond its forecast and downgraded the company and the ratings on its debt.

S&P lowered the issuer credit rating to B- from B and the issue-level ratings on the existing first- and second-lien credit facilities to B- and CCC, respectively. The 3 and 6 recovery ratings are unchanged.

“The downgrade reflects our opinion that higher debt leverage from the proposed acquisition and the company’s expansion into the more competitive commercial consulting market outweighs the combined company’s increased scale and diversity. Furthermore, Guidehouse’s leverage has been improving at a slower pace than we expected since it spun off from PricewaterhouseCoopers (PwC) last year,” S&P said in a press release.

The outlook is stable.

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