Dec 11 - Standard & Poor's Ratings Services said today that its senior
secured debt ratings on Philadelphia-based ARAMARK Corp.'s existing term loan C,
which is being upsized to $1.528 billion, including a proposed $670 million
add-on term loan, is unchanged at 'BB' (two notches above the corporate credit
rating on ARAMARK), with a recovery rating of '1', indicating our expectation of
very high (90% to 100%) recovery in the event of a payment default. At the same
time, we assigned ARAMARK Canada Ltd.'s proposed extended $50 million revolving
credit facility due Jan. 26, 2015, a 'BB' rating and a recovery rating of '1'.
We expect the proceeds from the food and support service operator's proposed
add-on term loan will be used primarily to repay its $650 million term loan due
in January of 2014. The ratings are subject to change, and assume the
transactions close on substantially the terms presented to us.
All of our other existing ratings on the company, including the 'B+' corporate
credit rating, remain unchanged. The outlook is stable. Pro forma for the
proposed transactions, total debt outstanding is about $6 billion.
The ratings on ARAMARK Holdings Corp., the ultimate parent company of ARAMARK
Corp., reflect our view that the company's financial risk profile remains
"highly leveraged," incorporating a very aggressive financial policy,
continued high debt maturities over the next two years, and considerable cash
flow required to fund capital expenditures and pay interest costs. Although we
believe the company has the capacity to meaningfully improve credit ratios
over time, we see the potential for another significant debt-financed
shareholder distribution or other leveraging event in the future. This is
currently a constraining rating factor.
We characterize ARAMARK's business risk profile as "satisfactory" and believe
the company benefits from its satisfactory--though not dominant--positions in
the competitive, fragmented markets for food and support services and uniform
and career apparel. We also believe the company will continue to derive a
significant portion of its cash flow from less economically sensitive sectors,
including education and health care; and that the company's diversified
customer portfolio reduces contract renewal risk. These factors translate into
a sizable stream of predictable, recurring revenues, and healthy cash flow
For the complete corporate credit rationale, please see the research report on
ARAMARK Holdings Corp., published Dec. 7, 2012, on RatingsDirect.
RELATED RESEARCH AND CRITERIA
-- Key Credit Factors: Global Criteria For Rating Companies In The
Service Sectors, Nov. 12, 2012
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Sept. 28, 2011
-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
ARAMARK Holdings Corp.
Corporate credit rating B+/Stable/--
$1.528 bil. term loan C due 2016 BB
Recovery rating 1
ARAMARK Canada Ltd.
$50 mil. revolver due 2015 BB
Recovery rating 1
Temporary telephone contact number: Linda Phelps (917) 583-1997
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left