Iron Mountain Inc.#s Proposed $500 Million Senior Secured Term Loan B Rated #BB# (Recovery Rating: #2#)

Stocks and Financial Services Press Releases Tuesday March 13, 2018 10:05
NEW YORK--13 Mar--S&P Global Ratings

NEW YORK (S&P Global Ratings) March 12, 2017--S&P Global Ratings today assigned its 'BB' issue-level rating and '2' recovery rating to Iron Mountain Inc.'s proposed $500 million senior secured term loan B due 2026. The '2' recovery rating indicates our expectation for substantial recovery (70%-90%; rounded estimate: 75%) of principal in the event of a payment default. The company's subsidiary, Iron Mountain Australia Group Pty. Ltd., is also issuing an incremental 100 million Australian dollars (A$) term loan to its existing A$250 million term loan due in 2022. The 'BB' issue-level rating and '2' recovery rating on the Australian dollars term loan are unchanged. Iron Mountain will use the net proceeds from both the U.S. and the Australian dollar term loans to repay its revolving credit facility borrowings.

Our corporate credit rating and stable rating outlook on Iron Mountain are unchanged. The rating reflects the company's position as the global market leader in the records management business, its high leverage, acquisitive growth strategy, above-average capital intensity for a business services company, and shareholder-favoring dividend policies. The company benefits from low customer attrition, high switching costs, favorable EBITDA margins, and long-term storage contracts that provide stable and recurring revenue. These strengths are somewhat offset by the increasing secular trend toward digital storage that could negatively affect the company long term.

The stable rating outlook reflects our expectation that Iron Mountain's leverage will decline to 5.5x by year-end 2018 and to the low-5x area in subsequent years as the company continues to invest in its business, with revenues increasing at a mid-single-digit percentage rate and lease-adjusted EBITDA margins improving to the low-40% area in 2018. Operating performance missteps, additional capital spending, or acquisitions that raise our leverage expectations above these levels could result in a negative rating action.

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