S&P assigns Ardonagh B-

S&P said it preliminarily rated Ardonagh Group Ltd. and its financing subsidiaries Ardonagh Finco Ltd. and Ardonagh Group Finance Ltd. B- with a stable outlook. The agency also assigned preliminary B- issue and 3 recovery ratings to the company's planned $500 million of senior secured notes and €500 million senior secured notes as well as CCC issue and 6 recovery ratings to the proposed $1 billion of senior unsecured notes.

The company plans to raise £2 billion equivalent of new seven-year senior secured facilities, split into U.S. dollar, euro, and Australian dollar tranches, £835 million equivalent of seven-year senior secured notes, split between €500 million and $500 million senior secured notes, and £800 million equivalent of eight-year senior unsecured notes. The company is also upsizing and extending its £192 million super senior revolving credit facility to £240 million-£300 million maturing in 2029.

“Pro forma for the transaction, we forecast that leverage will remain elevated at about 9.6x in 2024, compared with 15x in 2023. We base our leverage calculation for 2024 on adjusted debt of £4.6 billion, comprising: the proposed £2.8 billion equivalent of senior secured debt and £0.8 billion equivalent of senior unsecured debt; preference shares (including accrued interest) held by a financial sponsor, which we view as debt-like; and about £300 million of adjustments relating to other indebtedness, noncancellable lease obligations, and deferred and contingent consideration linked to acquisitions.

“In September 2023, Ardonagh announced the merger of its retail segment with Markerstudy. We expect the merger to be completed in 2024 (subject to regulatory approvals) and generate net sale proceeds of about £750 million. We assume that the company will use about £400 million of disposal proceeds for debt reduction in 2024 and the remainder toward cash on the balance sheet,” S&P said in a statement.

The stable outlook reflects a forecast for an improvement in Ardonagh's adjusted credit metrics, including EBITDA margins and FOCF, which is expected to turn positive in 2025, the agency said.

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