S&P: WaveDivision Holdings LLC Senior Secured Rating Remains 'BB-' On $125M Upsize Of Term Loan To $623M (Recovery Rating: 1)
The company will use net proceeds from the tack-on term loan to refinance about $8 million in revolver borrowings, to fund the buildout of fiber in adjacent markets, and for potential acquisitions.
The 'BB-' issue-level rating and '1' recovery rating on the company's $50 million revolver, for which the company is extending the maturity to 2019 from 2017, remain unchanged. We increased our default emergence valuation based on contributions from recent acquisitions, which provides secured creditors with additional cushion in our hypothetical default scenario despite the increase in secured debt.
The 'CCC+' issue-level ratings and '6' recovery ratings on Wave's $400 million 8.125% senior unsecured notes due 2020 and $175 million 9% pay-in-kind (8.25% cash pay option) holding company toggle notes due 2019 also remain unchanged. The '6' recovery rating indicates our expectation for negligible (0%-10%) recovery in the event of a payment default.
Our 'B' corporate credit rating and stable outlook for Wave are not affected by the transaction because we expect adjusted leverage to increase modestly to the high-6x area in 2016, still within our parameters for the current rating, from our previous forecast of leverage in the low-6x area. More importantly, we believe the proposed transaction will improve the company's liquidity position by funding sizeable capital spending requirements and addressing the maturity of the revolving credit facility, which was scheduled to mature in 2017.
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