S&P: XPO Logistics Inc.'s Proposed Term Loan Rated 'BB-' (Recovery Rating: '1')
XPO will use the proceeds from the term loan to refinance its existing $1.6 billion term loan due 2021. We will withdraw our ratings on the $1.6 billion term loan following the close of this transaction when it is fully repaid.
Key analytical factorsWe have completed a review of our recovery analysis following XPO's proposed refinancing of its existing senior secured term loan B. We assigned our 'BB-' issue-level rating and '1' recovery rating to the company's proposed senior secured term loan. We understand that the company will use all of the proceeds from this issuance to repay its existing term loan B. Once the transaction has been completed and the term loan has been repaid, we will withdraw our issue-level and recovery ratings on the existing term loan B facility. Simulated default and valuation assumptions:Simulated year of default: 2019EBITDA at emergence: $700 millionEBITDA multiple: 5.0xSimplified waterfall:Net enterprise value (after 5% admin. costs): $3.325 billionValuation split (obligors/nonobligors): 68%/32%Priority claims: $65 millionValue available to first-lien debt claims (collateral/noncollateral): $2.7 billion/$0Secured asset-based lending (ABL) revolver debt claims: $0.5 billion--Recovery expectations: Not applicableValue available to senior secured term loan claims (collateral/noncollateral): $2.2 billion/$0Secured term loan: $1.9 billion--Recovery expectations: 90%-100%Total value available to unsecured claims (XPO/Con-way): $494 million/$42 millionSenior XPO unsecured debt/pari passu unsecured claims: $2.75 billion/$330 million--Recovery expectations: 10%-30% (lower half of the range)Senior Con-way unsecured debt/pari passu unsecured claims: $576 million/$142 million--Recovery expectations: 0%-10%Note: All debt amounts include six months of prepetition interest. Collateral value equals asset pledge from obligors after priority claims plus equity pledge from nonobligors after nonobligor debt.