S&P rates Taboola.com B+, loan BB-

S&P said it gave Taboola.com Ltd. a B+ issuer rating and BB- issue and 2 recovery ratings to its planned $300 million term loan. The 2 recovery rating reflects the potential for substantial (70% to 90% range; rounded estimate 85%) recovery in default.

“Our B+ rating on Taboola reflects its participation in the highly competitive and fragmented digital advertising industry as a business-to-business advertising technology company that helps publishers maximize audience engagement and monetization and advertisers reach a target audience. Our ratings also reflect the company's meaningful publisher concentration, low EBITDA margins compared with some peers and exposure to economic cyclicality, which can require the company to make minimum guaranteed payments to its largest publishers during an advertising recession,” the agency said in a press release.

Taboola.com will use the proceeds to help it acquire Connexity Inc. for about $800 million, funding the rest balance sheet cash and Taboola shares.

The outlook is stable. S&P said it forecasts the company will deliver steady operating performance with solid revenue growth, improvement in blended EBITDA margins, benefiting from the higher margin acquisition EBITDA and pro forma adjusted gross leverage retreating toward the 3x area by the end of 2021 and under 3x in 2022.

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