S&P upgrades Allied Security loans to B+

Standard & Poor's said it raised its issue-level ratings on Allied Security Holdings LLC's $701 million senior secured first-lien credit facility (composed of a $81 million revolver and a $620 first-lien term loan) to B+ from B following the cancellation of a $220 million delayed-draw on the first-lien term loan that the agency initially included in its analysis.

S&P also revised the recovery rating on the first-lien debt to 2, indicating an expectation of substantial recovery (70%-90%) in a payment default scenario, from 3.

In addition, the agency affirmed the CCC+ issue-level rating on Allied Security’s $265 million secured second-lien debt. The $100 million delayed-draw on the second-lien debt was also cancelled. The recovery rating on the second-lien debt remains 6, indicating an expectation of negligible recovery (0%-10%) in a payment default scenario.

Proceeds from the delayed-draw transaction would have funded an acquisition, which did not close.

S&P estimates credit metrics remain weak, with adjusted leverage of about 6.6 times for the 12 months ended Sept. 30, increased from about 5.2 times in the prior year, due to a debt-funded dividend. The agency said it expects credit metrics will remain near current levels and in line with indicative ratios (including leverage above 5 times) for the "highly leveraged" financial profile over the next year, given the presence of a financial sponsor with a history of maintaining high leverage from debt-funded shareholder distributions and acquisitions.

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