OREANDA-NEWS. S&P Global Ratings said today that it assigned its 'B' corporate credit rating to Atlanta-based DTI Holdco Inc. The outlook is stable. We also assigned our 'B' issue-level rating and '3' recovery rating to the company's senior secured credit facilities, which consist of a $100 million revolving credit facility expiring in 2021 and $1.195 billion term loan B maturing in 2023. The '3' recovery rating indicates our expectation for meaningful (50% to 70%; lower half of the range) recovery of principal in the event of default. Our 'B' rating on DTI Holdco is based on the combined company's increased leverage profile pro forma the pending transformational combination of the two companies, and on its positioning in the relatively fragmented legal process outsourcing (LPO) and general business process outsourcing (BPO) markets. The company's roughly 50% contract-based recurring revenue base partly offsets these risks. DTI Holdco has had primarily acquisitive growth over the past several years, targeting LPO service companies to become a provider of complementary offerings for on - and off-site legal and administrative staffing, legal document review, court reporting, and domestic electronic discovery processing and hosting. The acquisition of Epiq Systems Inc. will incorporate the company's domestic and international eDiscovery services, as well as bankruptcy processing and class-action settlement administration offerings. The combined entity will benefit from a comprehensive suite of LPO offerings, Epiq's rapidly growing international eDiscovery presence, stable revenues, and low customer concentration. The LPO service provider market and broader BPO market have been relatively fragmented, with significant overlap in offerings between competitors, pressuring margins and narrowing organic revenue growth opportunities. We anticipate that DTI's positioning in eDiscovery, particularly international, will be the main revenue growth driver, while legacy staffing, document review, bankruptcy and settlement, and court reporting segments will experience more moderate flat to low-single-digit growth, as the competitive landscape remains saturated with BPO providers. Our assessment of DTI Holdco's financial risk profile is based on the company's significant debt burden, as well as on restructuring - and transaction-related costs that constrain operating metrics and cash flow in the near term. We anticipate these to be nonrecurring costs, the absence of which will allow for approximately $70 million of free operating cash flow in fiscal 2017. Adjusted leverage at transaction close is in the low 6x area, which we anticipate to decrease modestly to the high 5x area over 2017 through moderate organic revenue growth in eDiscovery segments, operating expense reductions, and required amortization and cash flow sweep on the senior term loan. Given the company's financial sponsor ownership, we do not net cash in our assessment of the company's leverage. Our base-case scenario assumes the following:S&P Global GDP growth forecast of 2.3% in 2016 and 2.7% in 2017Consolidated revenue of about $1 billion at transaction close, growing 3% to 4% in fiscal years 2017 and 2018, primarily as a result of international eDiscovery segment growthAdjusted EBITDA margin of approximately 20% at transaction close, with 1- to 2-percentage-point expansion over fiscal years 2017 and 2018 due to labor - and capital-expenditures-related synergiesAllocation of 50% of excess cash flow to debt paydown as required under the credit agreement, stepping down to 25% and 0%, respectively, at 4.5x and 4.0x net leverage ratiosNo acquisitions in 2017 and 2018 The stable outlook reflects our expectation over the next 12 months for low - to mid-single-digit organic revenue growth and moderate margin expansion through labor and capital expenditure synergies. We anticipate low 6x adjusted leverage at transaction close with modest deleveraging through required amortization payments and cash flow sweep to bring adjusted leverage to the high 5x area in 2017. Although a downgrade or upgrade are unlikely over 2016 and 2017, we could consider a downgrade if unanticipated operating performance weakness, acquisition integration difficulties, or adoption of a more aggressive financial policy cause debt to EBITDA to be sustained above 7x. We could consider an upgrade if DTI is able to execute organic revenue growth and deleveraging through realization of synergies and paydown of debt from required amortization payments and cash flow sweep such that debt to EBITDA is sustained below 5x.