Service Corp. International#s Proposed $675 Million Term Loan Rated #BB+#; $525 Million Senior Unsecured Note Rated #BB#

Stocks and Financial Services Press Releases Wednesday December 6, 2017 09:41
New York--6 Dec--S&P Global Ratings

New York (S&P Global Ratings) Dec. 5, 2017--S&P Global Ratings today assigned its 'BB+' issue-level rating and '3' recovery rating to the proposed $1.675 billion credit facility to be issued by Service Corp. International (SCI). The new credit facility consists of a $1 billion revolving credit facility (upsized from $700 million) and a $675 million term loan. The '3' recovery rating reflects our expectation for meaningful (65% capped) recovery in the event of a payment default. Our recovery rating on the credit facility is capped at '3'. The amortization on the new term loan would be revised to 5% for the first four years followed by 10% amortization thereafter. The maturity for both the revolver and the term loan will be extended by approximately two years to 2022.

In addition, we assigned our 'BB' rating and '5' recovery rating to SCI's new $525 million senior unsecured notes (subordinated). The '5' recovery rating reflects our expectation for modest (10%-30%; rounded estimate: 15%) recovery in the event of a payment default.

The company intends to use the proceeds to refinance its existing $700 million term loan due 2021 ($647.5 million outstanding as of Sept. 30, 2017), repay a portion of outstanding revolver borrowings ($470 million as of Sept. 30, 2017), and redeem its $250 million senior unsecured notes due 2018. The transaction will be leverage neutral, and we expect the company will end 2017 with pro forma leverage of 3.9x.

Our 'BB+' corporate credit rating and stable outlook on SCI reflects the company's narrow, but leading position as a provider of funeral and cemetery services. It also reflects our expectation that adjusted leverage will range between the mid-3x and low-4x area over the next couple of years.

For the corporate credit rationale on Service Corp. International, see the summary analysis published on May 2, 2017.

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