S&P puts Aretec on watch

S&P said it placed the B issuer and CCC+ senior unsecured ratings for Aretec Group Inc. on CreditWatch with negative implications.

Aretec agreed to buy Avantax Inc. for $1.2 billion. The deal is expected to close by the end of 2023. Aretec secured $2.7 billion of debt financing to fund the deal, refinance the $1.011 billion first-lien term loan due in October 2025, and extend and increase the $175 million revolver to $300 million.

“While Aretec's relatively low leverage (of below 4x as of June 30 on a pro-forma basis including the recently closed Securian acquisition) provides some flexibility to take on additional debt compared with our downside threshold of 6x, we expect a meaningful deterioration in our adjusted leverage and interest coverage metrics given the large size of the Avantax acquisition,” S&P said in a press release.

The CreditWatch placement reflects the view that Aretec's credit metrics could weaken following its mostly debt-financed acquisition of Avantax, the agency said.

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