S&P rates new Riverbed, loan CCC+

S&P said it assigned Riverbed Intermediate Holdings LLC, the new parent of Riverbed Technology Inc., which emerged from bankruptcy on Dec. 7, a CCC+ rating. The agency rated Riverbed’s $900 million senior secured exit term loan due in 2026, CCC+ with a 3 recovery rating ((50%-70%: rounded estimate: 55%). The capital structure also includes $354 million of convertible preferred equity.

“Our uncertainty around Riverbed's ability to sustain the debt obligation in its capital structure over the long term is the key factor driving the CCC+ issuer credit rating. Riverbed now carries lower leverage post emergence from bankruptcy and a reduced cash interest burden because of lower debt balances and a payment-in-kind (PIK) interest component,” S&P said in a press release.

However, the agency noted Riverbed still has high leverage with S&P Global Ratings-adjusted leverage near 10x (about 7.5x when excluding $354 million of convertible equity which it treats as debt).

“Considering Riverbed's weak performance in recent years, we see such leverage as unsustainable over the longer term, absent improved operating performance, including a return to revenue growth and improved profitability and cash flow generation,” S&P said.

The outlook is stable.

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