S&P lowers PrimeSource loan

S&P said it revised the recovery rating on PriSo Acquisition Corp.'s (PrimeSource Building Products) $355 million first-lien term loan due 2022 to 3 from 2 and lowered the rating on the loan to B from B+.

The rating changes come as a result of the company's proposed $75 million add-on to the term loan.

S&P also said it affirmed the CCC+ rating on PrimeSource's existing senior unsecured notes with a 6 recovery rating, which includes the company's proposed $75 million add-on to the existing $200 million senior notes due 2023.

The proceeds of the new debt, as well as $75 million drawn on its asset-based lending facility, will be used to fund a special dividend to its financial sponsor owners, the agency said.

The 3 recovery rating on the term loan indicates 50% to 70% expected default recovery.

The 6 recovery rating indicates 0 to 10% expected default recovery.

While the transaction raises leverage, the ratings incorporate an expectation that leverage will remain in the 5x to 6x range, S&P said.

The agency also said it expects the company’s financial policy to remain aggressive under financial sponsor ownership.

The ratings also reflect the company's position as a leading two-step distributor, moderate customer and supplier concentration, S&P said, and exposure to residential construction and repair and remodel markets.

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