S&P rates Hillman term loan B+

S&P said it affirmed Hillman Group Inc.’s B corporate credit rating and assigned a B corporate credit rating to parent company, Hillman Cos. Inc.

The outlook is stable.

At the same time, the agency assigned a B+ issue level ratings to Hillman's proposed $530 million senior secured term loan B due 2025 with a 2 recovery rating, indicating lenders could expect substantial (70% to 90%, rounded estimate: 80%) recovery in the event of payment default or bankruptcy.

The facility has a fungible $165 million delayed draw-term loan that will not be drawn on close. However, the agency said it anticipates the company could draw on it during the next year to fund acquisitions.

S&P also affirmed the issue-level rating on the $330 million senior unsecured notes due July 2022 at CCC+. The recovery rating remains 6, indicating the belief that lenders could expect negligible (0% to 10%, rounded estimate: 0%) recovery.

The company will use the new $530 million term loan B, along with about $40 million drawn on a new $150 million ABL revolver (unrated) due 2023, to replace its current $70 million cash flow revolver due June 2019, refinance its existing $530 million outstanding term loan due 2021 and to cover fees and expenses.

“The company's operating performance for fiscal 2017 improved from 2016, and while we expect debt leverage to remain high, we believe the company's good operating cash flows and recent efficiency initiatives should support modest increases in debt leverage for acquisitions during the next 12 months,” S&P said in a news release.

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