S&P assigns B to Arthur Midco, loan

S&P said it assigned B ratings to Arthur Midco Ltd. and its new $520 million six-year term loan. The recovery rating on the loan is 3. The outlook is stable.

Arthur Midco was established by private equity firm TPG to buy a controlling stake in A-Gas. TPG used the loan, to fund the buyout, pay transaction fees and repay secured loans of about £260 million. There is no rolled-over debt in the capital structure, except for about £23 million of lease liabilities. Arthur Midco also borrowed an unrated $60 million revolver.

“We assume A-Gas will generate high profitability thanks to its leading market position in a specialized industry. The company holds top market positions in the specialized and niche gas reclamation market, where technical know-how, service, and proximity to customers are key. The good technical capabilities in the gas separation process allow the company to run its operations efficiently–which we note in the high yields from recovered gases–and help it to generate high profitability.

“The company's EBITDA margin tends to stay at 18%-22%, and we anticipate improvements over 2023 and in 2024, benefiting from a higher proportion of revenue from the company's circular economy segment, which includes reclaim products, services, and the sale of carbon credits that are produced during the normal course of the gas reclamation process,” S&P said in a statement.

The stable outlook reflects the view that despite the higher debt, the company’s S&P Global Ratings-adjusted leverage of 5x-5.3x will decline to 4x-4.5x in 2024.

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