S&P raises Agiliti first-lien loan to B+

S&P said it raised the rating on Agiliti Inc.’s first-lien debt to B+ from B and revised the recovery rating to 2 from 3.

Agiliti plans to issue a new second-lien loan for $240 million that will be unrated. Proceeds from the loan will be used to fund a shareholder dividend.

“We raised our issue-level rating and revised the recovery rating to reflect our view that the recovery prospects for the company’s first-lien debt are enhanced by the presence of lower-priority debt,” said S&P in a press release.

S&P affirmed its B rating on the company and kept the outlook stable.

“The affirmation reflects our belief that the effects of Agiliti’s debt-financed shareholder dividend on its credit risk profile are mostly mitigated by its recently higher-than-expected EBITDA growth and improved cash flow generation. We expect that the company will largely absorb the higher interest expense from the new debt with its improved free cash flow in 2020, which we believe is sustainable. Therefore, we expect Agiliti to generate free cash flow of about $20 million, which is roughly in line with our expectations prior to the issuance of the new debt,” the agency said.

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