S&P trims 1-800 first-lien recovery rating

S&P said it revised its outlook for CNT Holdings I Corp.’s (1-800 Contacts Inc.) first-lien term loan to 4 from 3, reflecting average (30%-50%; rounded estimate: 40%) recovery. A 3 recovery rating indicates meaningful recovery (50%-70%).

The agency also affirmed its B ratings on CNT and its first-lien loans.

CNT plans to secure a $565 million add-on to its first-lien term loan. Initially, the company sought a $350 million add-on.

CNT plans to use the add-on to pay off its $315 million of second-lien term debt, rated CCC+ with a 6 recovery rating (0%), and fund a $250 million distribution to shareholders. “Pro forma for the transaction, we expect S&P Global Ratings-adjusted leverage of about 7x. We believe it will continue to expand its revenue and EBITDA base, leading us to forecast leverage improving to 6.2x by the end of 2024 with free operating cash flow in excess of $70 million,” S&P said in a statement.

The outlook is stable.

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