OREANDA-NEWS. S&P Global Ratings today raised its issue-level rating on Longhorn Midco II LLC's (herein referred to as CLEAResult), senior secured debt (issued by CRCI Holdings Inc.), which consists of a five-year $40 million revolving credit facility and a seven-year $284 million first-lien term loan, to 'B+' from 'B'. We are also revising the recovery rating to '2' from '3', reflecting our expectation for substantial (70% to 90%, low end of the range) recovery in the event of a payment default. The '2' recovery rating results from the company's recent decision to downsize its credit facility by approximately $46 million to $284 million from $330 million (only the term loan B is being reduced) leading to higher recovery value should a default occur. CLEAResult's corporate credit rating remains unchanged, as we are assessing only the company's recovery prospects based on the material reduction to its term loan B. The company intends to make a smaller distribution to its financial sponsor based on the revised terms of the transaction.

Our ratings reflect CLEAResult's relatively small scale as a niche player, narrow business focus providing energy efficiency solutions to utility companies, and some customer concentration. CLEAResult has relatively small scale, and it operates in a fragmented and highly competitive industry, which has many smaller players. Furthermore, the financial sponsor's majority ownership in the company currently constrains our view of the company's financial risk profile. Ownership is recapitalizing the company, resulting in S&P Global adjusted debt to EBITDA in the mid - to high-4x area, while paying a dividend. Pro forma for the refinancing transaction, we estimate CLEAResult's adjusted debt to EBITDA totals about 4.8x, which we expect to improve to mid-4x range over the next year, primarily reflecting EBITDA growth from recent acquisitions.