Aug 9 - Standard & Poor's Ratings Services said today it assigned its 'B+'
senior secured debt rating to Memphis, Tenn.-based The ServiceMaster Co.'s
proposed tranche B term loan due January 2017, which the company estimates will
be about $1 billion. The tranche B term loan would extend a portion of its
existing $2.5 billion secured term loan facility due in July 2014. The recovery
rating on the secured term loan is '2', indicating our expectation of
substantial recovery (70%-90%) to debtholders in the event of a default.
We expect this transaction, together with the recently issued $1 billion of
6.125% senior unsecured notes, to be essentially leverage neutral as the
company will use proceeds from both transactions primarily to repay existing
debt. As such, we estimate the company's debt to EBITDA leverage will remain
relatively unchanged, which was about 6.5x for the 12 months ended June 30,
2012. The company had approximately $3.9 billion of reported debt outstanding
as of June 30, 2012.
The ratings on ServiceMaster reflect our view that the company's financial
profile continues to be "highly leveraged," particularly because the company's
balance sheet remains highly leveraged and we expect cash flow protection
measures to continue to be weak. In addition, we continue to consider
ServiceMaster's business risk profile to be "fair," reflecting our view that
the company's business will remain sensitive to still-weak economic
conditions, consumer spending, and seasonal weather conditions. Still,
ServiceMaster benefits from its business positions in its fragmented and
competitive end markets, which have historically translated into good cash
flow generation from a fairly diverse portfolio of services.
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-- Criteria Guidelines For Recovery Ratings On Global Industrials
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-- Corporate Ratings Criteria 2008, April 15, 2008
The ServiceMaster Co.
Corporate Credit Rating B/Stable/--
The ServiceMaster Co.
Sr secd tranche B term loan due January 2017 B+
Recovery Rating 2
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