S&P gives B+ to CDK notes

S&P said it assigned B+ issue-level and 3 recovery ratings to CDK Global II LLC's planned $755 million senior secured notes. The recovery rating indicates meaningful (50%-70%; rounded estimate: 55%) recovery in default.

“While our B+ issue-level and 3 recovery ratings on CDK's existing first-lien debt facilities and $750 million senior secured notes are unchanged, we revised our rounded recovery estimate to 55% from 65% to reflect the increase in first-lien debt that would impair recovery prospects for secured creditors,” the agency said in a press release.

CDK plans to use the proceeds to fully pay down the $755 million balance on its second-lien term loan due 2030.

“We view the transaction as leverage neutral and believe it improves the company's liquidity and cash flows by reducing its interest expense since it is effectively converting its higher-rate floating debt to lower-cost fixed debt,” S&P said.

The outlook is stable.

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