S&P rates Beats loan B+

Standard & Poor's said it assigned a B+ corporate credit rating to Beats Electronics LLC, along with a B+ rating its $700 million proposed senior secured credit facility, consisting of a $200 million revolving credit facility maturing 2018 and $500 million term loan B maturing 2019.

The recovery rating on this facility is 3, reflecting 50% to 70% expected default recovery.

The outlook is stable.

The proceeds, together with about $190 million in cash, will be used for corporate purposes, including the possibility of up to $400 million in shareholder returns permitted for a specified time period from the close of the transaction, S&P said, and to retire the company's existing $225 million senior secured term loan, resulting in $550 million in drawn debt at the close of the transaction.

The ratings reflect the company's aggressive financial policies, narrow product focus and exposure to changing consumer preferences, said Chris Johnson, an S&P analyst.

The company's brand awareness is currently very high, benefiting from the endorsement of several celebrities, the agency said. As a result, the company has a No. 1 global market share in the premium-priced headphone category, S&P said, and has good growth opportunities through geographic and product diversification.

There is a near-term risk of demand suddenly dropping if the company's brand stops resonating with consumers or if new entrants provide product substitutes, the agency added.

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