S&P assigns Champion B, loan B+

S&P said it preliminary assigned a B issuer rating to Champion (SCUR-Alpha 1503 GmbH) and a preliminary B+ rating to its €2.9 billion proposed senior secured term loan. The outlook is stable.

Advent International and Lanxess AG are forming Champion by combining the acquired DSM Engineering Materials with Lanxess' high-performance materials business.

The deal will be funded with the term loan, €676 million of payment-in-kind (PIK) notes, and €200 million of preferred equity certificates (PECs) to be provided by Lanxess, the latter of which will be used to bolster the company's liquidity.

“We view the initial capital structure as highly leveraged, with adjusted debt to EBITDA estimated at almost 9x in 2023 (roughly 8.5x without PECs),” S&P said in a press release.

The stable outlook reflects the view that Champion will swiftly lower its leverage to below 8x, or 7.5x without the PECs, in 2024, the agency explained.

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