S&P: American Bath Group LLC Assigned 'B' Corporate Credit Rating, Outlook Stable; New Debt Rated
At the same time, we assigned our 'B' issue-level rating (same as the corporate credit rating) to ABG's proposed $50 million senior secured revolving credit facility due 2021 and $320 million senior secured first-lien term loan due 2023. The '3' recovery rating on the facility indicates our expectation for meaningful (50%-70%; upper half of the range) recovery in the event of a payment default.
We also assigned our 'CCC+' issue-level rating (two notches below the corporate credit rating) to ABG's proposed $95 million second-lien senior secured term loan due 2024. The '6' recovery rating on the facility indicates our expectation of negligible (0%-10%) recovery in the event of a payment default.
"The stable outlook reflects our expectation that ABG will maintain operational performance levels that will result in pro forma leverage measures between 4x and 5x during the next 12 months," said S&P Global Ratings credit analyst Maurice Austin.
A downgrade is likely within the next 12 months if ABG has weaker-than-expected end-market demand such that total leverage increases and is trending above 6x or if liquidity materially lessens.
We are unlikely to upgrade the company over the next 12 months given its ownership by a private equity firm. However, We could raise our rating on ABG if the company's operating performance is much better than we expect, such that debt leverage is sustained well below 5x and FFO to debt above 12% and if we gained confidence that the company's owner is committed to maintaining this more conservative financial risk profile.