S&P assigns Merlin B-, loans B-, CCC

S&P said it assigned B- ratings to Merlin Acquisition Corp. and its planned first-lien debt. The first-lien recovery rating is 3. The agency also gave CCC issue and 6 recovery ratings to the issuer’s second-lien term loan.

KKR & Co. is acquiring Merlin, the parent of specialty protein processing solutions manufacturer Bettcher Industries Inc. The debt financing will consist of a $60 million first-lien revolving credit facility, undrawn at close, due 2026, a $300 million first-lien term loan due 2028 and a $85 million second-lien term loan due 2029.

“With revenues of about $160 million in 2020, Merlin is one of the smallest capital goods companies we rate. Nonetheless, the company holds leading positions within a variety of automation processing applications including trimmers, scissors, and skinners. The company also benefits from a sizable aftermarket installed base which supports stability and profitability,” S&P said in a press release.

The outlook is stable. The agency said it forecasts modest deleveraging over the next 12 months given favorable demand trends and cost initiatives that focus on both growing the topline and margin profile. S&P projects debt to EBITDA of about 7.5x for 2021 declining to the low-7x area in 2022.

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