OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB-' issue-level rating and '2' recovery rating to Cincinnati, Ohio-based Vantiv LLC's (BB+/Stable/--) announced $515 million first-lien term loan B due 2023. The '2' recovery rating indicates our expectation for substantial recovery (70%-90%; upper end of the range) in the event of a payment default.

Vantiv intends to refinance its debt in full by amending and extending its existing credit facilities, with the extensions of its final term loan A maturity to 2023 from 2021 and its revolving credit facility to 2021 from 2019. Through this transaction, the company also plans to reprice and extend its term loan B and to upsize its revolver (undrawn as of June 30, 2016) to $650 million from $425 million. We expect that this transaction, once completed, will result in approximately a three-year extension to the company's existing weighted average debt maturity and a modest reduction to its interest expense.

We view this transaction as consistent with Vantiv's moderate financial policy and risk profile. We expect that the company will continue to achieve solid organic revenue growth exceeding the mid-single-digit percentages, stable EBITDA margins, and leverage of 3x-4x in 2016 and 2017. We could lower the rating if leverage increases to more than 4x due to a combination of debt-financed acquisitions or significant share repurchases, though we consider this outcome to be less likely. Alternatively, we would consider an upgrade if the company commits to and achieves leverage of about 3x or lower while continuing to increase revenue organically with flat-to-increasing EBITDA margins and increasing sales in its high-growth channels, including integrated payments, e-commerce, and merchant banking.

Our business risk assessment on Vantiv reflects the company's meaningful market share in the U. S. payment processing industry, the breadth of its services, and its strong growth momentum. These factors are partly offset by the company's relatively limited geographic diversity and sizeable acquisition appetite. Vantiv has about an 18% share of processed bank card transactions in the U. S. It is the second-largest U. S. merchant acquirer by transaction count and the largest personal identification number (PIN) debit acquirer, according to The Nilson Report.

Our financial risk profile assessment reflects the company's adjusted net leverage of about 3.5x as of June 30, 2016. We expect further deleveraging in 2016 and 2017 due to continued debt reduction through principal amortization payments and EBITDA growth supported by organic net revenue growth in the high-single-digit area and steady EBITDA margins. We expect the company will continue to generate about $600 million-$700 million in free cash flow annually in 2016 and 2017, which will provide it financial flexibility to continue deleveraging while pursuing acquisitions and accommodating moderate share repurchases.