S&P rates Science Applications loan BB

Standard & Poor’s said it assigned a BB corporate credit rating on Science Applications International Corp.

The agency also said it assigned a BB rating to the company’s secured credit facility, which includes the existing $500 million term loan A, $100 million add-on to the term loan A, $200 million undrawn revolver and new $570 million term loan B.

S&P also said it assigned a recovery rating of 3 to the credit facility, indicating 50% to 70% expected default recovery.

The outlook is stable.

The ratings reflect the competitive nature of the government-services market combined with the company’s elevated debt levels following its proposed debt-financed acquisition of Scitor Corp., S&P said.

The ratings also consider its solid and predictable free cash flow, much of which is expected to be applied to debt reduction over the next year, the agency said.

The company plans to raise $670 million of additional debt, which, along with its cash on hand, will be used to fund the $790 million Scitor acquisition resulting in debt-to-EBITDA rising to about 3.5x on a pro-forma basis from about 1x previously, S&P said.

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