S&P gives Maximus BB+

S&P said it gave Maximus Inc. and its planned senior secured credit facility BB+ ratings. The recovery rating on the facility will be 3, reflecting meaningful (50%-70%, rounded estimate: 65%) recovery in default.

The capital structure will include a $600 million revolving credit facility due 2026, $1.1 billion term loan A due 2026, and $400 million term loan B due 2028, increasing pro forma leverage to 2.8x from 0.3x as of Sept. 30, 2020. It will also use some of the proceeds to repay $240 million outstanding on the $400 million revolving credit facility maturing 2022.

Maximus plans to acquire Veterans Evaluation Services in a debt-financed transaction for $1.4 billion. “The VES acquisition improves the company's higher-value-added services mix and will improve its margin profile. The VES acquisition bodes well for the company's long-term growth strategy of expanding into higher-value-added services and gaining efficiencies through digital transformation. While the acquisition is considerably large relative to prior investments, Maximus' existing expertise in providing medical disability examination services will limit integration risks,” S&P said in a press release.

The stable outlook reflects an expectation for Maximus to grow revenue and EBITDA organically, successfully integrating the VES acquisition, and lower its adjusted leverage comfortably below 2.5x over the next 12-18 months, S&P said.

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