S&P rates TenCate loans B+

S&P said it assigned a B+ rating to Tennessee Acquisition BV (TenCate), along with a B+ rating and 3 recovery rating to the existing term loan B and the upcoming term loan B add-on.

TenCate is planning to issue an additional €120 million add-on to its term loan B to refinance current drawings under its revolving credit facility following acquisitions and to make an exceptional return to shareholders, S&P said.

After the transaction, TenCate's leverage will peak at 4.5x, representing a 0.5x net increase in leverage since Dec. 31, 2018, the agency noted.

Nevertheless, S&P said it thinks TenCate will maintain adjusted leverage well below 5x and healthy interest coverage.

It is also expected to generate positive free cash flow of about €30 million annually, the agency said.

The outlook is stable because the increase in the group's debt-to-EBITDA ratio will be only limited, S&P said.

The company's anticipated profitable growth in 2019 will foster de-leveraging and lead to margins of more than 10%, the agency added.

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