S&P rates Exela, facilities, notes B

S&P said it assigned a B corporate credit rating to Exela Technologies.

The outlook is stable.

At the same time, the agency assigned a B issue-level rating to the company's proposed $100 million revolving credit facility due 2022, $350 million senior secured term loan due 2023 and $1 billion senior secured notes due 2023. The 3 recovery rating indicates an expectation for meaningful (50% to 70%; rounded estimate: 60%) recovery in the event of payment default.

S&P said the rating reflects S&P-adjusted leverage in the high-6 times area immediately following the merger and the agency’s forecast for adjusted leverage to fall to around 6 times over the next 12 to 18 months.

S&P-adjusted leverage includes $275 million of preferred equity, which the agency views as debt because of the incentive for the owners to replace this capital with debt.

The rating also reflects S&P’s view of the mature but critical type of businesses that the combined company will operate. The agency views both business process outsourcing (the BPO business run by SourceHOV) and document process outsourcing (the DPO business run by Novitex) services as highly competitive, volatile and subject to price competition.

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