OREANDA-NEWS. S&P Global Ratings said today that it has placed all of its ratings on ADS Waste Holdings Inc., including our 'B' corporate credit rating, on CreditWatch with positive implications.

"The CreditWatch placement follows the company's announcement this morning that it has commenced the IPO of 19.25 million shares of its common stock," said S&P Global credit analyst James Siahaan. "The company intends to use the net proceeds from the offering to repay a portion of its senior secured term loan B borrowings." Pro forma for the IPO and debt repayment, we estimate that the company's adjusted debt-to-EBITDA metric (including our adjustments for operating leases, asset retirement obligations, and other debt-like items) would have decreased to 5.5x as of June 30, 2016, compared with 6.4x prior to the debt reduction. Although the company's financial sponsor Highstar Capital will still retain majority ownership after the completion of the IPO (depending on the offering price and any potential greenshoe exercise) and we will continue to classify the company's financial policy as FS-6, we note that the Canada Pension Plan Investment Board holds 18% of ADS' stock, which somewhat mitigates Highstar's aggressive financial policies.

We plan to resolve the CreditWatch placement following the completion of the IPO and the partial repayment of the term loan, which we expect will occur in the first half of October 2016.

Following the completion of these transactions, we will review the company's business outlook, capital structure, and financial policy. Given the reduction in ADS' debt leverage and our anticipation that its adjusted debt-to-EBITDA metric will remain below 6.0x, there is a one-in-two chance that we will raise our corporate credit rating on ADS Waste Holdings Inc. by one notch to 'B+'. We will also conduct a comprehensive review of our recovery analysis on ADS Waste's debt issues. This review could lead us to revise our recovery ratings and raise our issue-level ratings on the company's debt to reflect the change in its proportion of secured debt relative to unsecured debt at default.

Alternatively, we could affirm our ratings on ADS, remove them from CreditWatch, and assign a stable outlook if the IPO does not generate a material enough level of proceeds to reduce the company's debt, if the proceeds are used for alternate purposes, or if ADS cannot complete the transaction because of adverse market conditions.