OREANDA-NEWS. S&P Global Ratings today assigned its 'BB' issue-level rating and '4' recovery rating to Charlotte, N. C.-based SPX FLOW Inc.'s proposed $600 million senior unsecured note issuance, which is composed of one tranche of senior unsecured notes due 2024 and one tranche of senior unsecured notes due 2026. The '4' recovery rating indicates our expectation for substantial (30%-50%; lower half of the range) recovery for lenders in the event of a payment default.

The company intends to use the proceeds from this offering, together with borrowings under its domestic revolving credit facility, to repurchase and/or redeem and retire its $600 million of outstanding senior notes due 2017.

With revenue of about $2.4 billion in 2015, SPX FLOW manufactures flow components, process equipment, and turn-key systems for the food and beverage, power and energy, and industrial end markets. The corporate credit rating on SPX FLOW is based on our fair assessment of the company's business risk profile and our significant assessment of its financial risk profile. We expect that SPX FLOW's operating performance will remain weak in the near - to intermediate-term and--as a result--anticipate that the company's leverage metrics will continue to be stretched.

For our complete corporate credit rating rationale, please see our research update on SPX FLOW Inc. published May 11, 2016, on RatingsDirect.

RECOVERY ANALYSIS

Key analytical factorsThe gross enterprise value of $1.075 billion is based on a run-rate EBITDA of $215 million and a valuation multiple of 5x. Our simulated default scenario contemplates a default in 2021 caused by a sustained macroeconomic downturn that hurts SPX FLOW's end markets, particularly the oil and gas and industrial end markets. This would cause the company's revenue and operating income to decline and affect its ability to service its debt. Our recovery analysis assumes that in a hypothetical bankruptcy scenario, after satisfying any unpaid priority administrative expenses and secured claims, the unsecured lenders' recoveries would be at the lower end of the 30%-50% range. We have not assumed any draws under the $500 million foreign credit instrument facility for performance letters of credit or guarantees. Simulated default assumptionsSimulated year of default: 2021EBITDA at emergence: $215 millionEBITDA multiple: 5xSimplified waterfallNet enterprise value (after 5% admin. costs): $1.021 billionValuation split (obligors/nonobligors): 35%/65%Priority claims: $60 millionValue available to first-lien debt claims: $729.1 millionSecured first-lien debt claims: $734.4 million--Recovery expectations: Not applicableTotal value available to unsecured claims: $232.3 millionSenior unsecured debt/pari passu unsecured claims: $616.9 million/$101.4 million--Recovery expectations: 30%-50% (lower half of the range)