S&P rates 1A Smart Start loans B-, CCC

S&P said it rated 1A Smart Start LLC’s planned $115 million second-lien term loan CCC with a 6 recovery rating. Concurrently, the agency lowered 1A Smart Start’s ratings to B- from B and assigned a B- issue rating and 3 recovery rating to the proposed incremental $40 million first-lien term loan.

The company will use the proceeds along with $4 million of cash to fund a $154 million dividend to its sponsor.

“We now view Smart Start's financial policy as more aggressive than we previously expected, given the large size of the proposed dividend. The proposed $154 million dividend follows the previous payout of $108.7 million in 2017. The transaction will result in weaker credit metrics for Smart Start, with pro forma leverage increasing to 7.1x from 6.3x in 2020,” S&P said in a press release.

The outlook is stable.

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