S&P rates AG Group, loan B

S&P said it gave B ratings to AG Group Holdings Inc. (Addison Group) and its planned senior secured $525 million first-lien term loan. The loan’s 3 recovery rating indicates expectation for meaningful (50%-70%; rounded estimate: 55%) recovery. APFS Staffing Inc. (not rated) will be a co-obligor of the company's new debt.

Trilantic North America, which it is funding with a combination of debt and equity, is buying Addison in a leveraged buyout.

“Our B issuer credit rating reflects the material increase in the company's leverage to the low-5x area from 3x in 2021. Pro forma for the LBO, we expect Addison's S&P Global Ratings-adjusted leverage will rise to the low-5x area in fiscal year 2022, which compares with our estimate of 3x in 2021. We include the $28 million of preference shares from Odyssey Investment Partners in our calculations and assume that the company will elect to use the payment-in-kind (PIK) interest feature on these shares over the next several years,” S&P said in a press release.

The agency said it sees Addison modestly improving its credit metrics over the next 12 months, including lowering its leverage to the 5x area, assuming no material leveraging transactions, in fiscal year 2023 from the low-5x area in fiscal year 2022 pro forma for the transaction. The outlook is stable.

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