S&P Global Ratings said that it assigned its ‘CCC+’ debt rating to NFP Corp.’s (B/Negative/–) $950 million senior notes maturing in 2028. The recovery rating is ’6′, indicating its expectation for negligible (0%) recovery of principal in the event of a default.
S&P expects NFP to use the proceeds to refinance its existing $650 million 6.875% and $250 million 8.0% senior notes due July 2025, as well as to fund related call premium and fees.
For the last-12-month period ended March 31, 2020, the company generated total revenue of $1.46 billion and pro forma adjusted EBITDA of $386 million (approximate 24% margin), according to S&P’s calculations, which exclude certain add-back items. Including this issuance, pro forma financial leverage for the same time frame is 10.6x (9.2x excluding preferred treated as debt), reflecting sustained weakness relative to S&P’s run-rate expectations. This weakness primarily stems from the lag between liquidity build and ultimate deployment for deal funding through 2020. S&P believes its adjusted pro forma leverage could sustain above 8.0x well into 2021, reinforcing its negative outlook and marginally increasing the risk of a downgrade within 12 months.
S&P’s negative outlook on NFP continues to reflect heightened risk of a worse-than-expected revenue decline and flat EBITDA margin expansion amid the COVID-19 pandemic, resulting in less robust cash flow generation and credit metrics eroding to a level unsupportive of the current rating within 12 months.