Bulletin: FCG Acquisitions Inc.'s Proposed $100 Million Incremental First-Lien Term Loan Due 2028 Is Credit Neutral

BOISE (S&P Global Ratings) June 5, 2024--S&P Global Ratings today said that FCG Acquisitions Inc.'s (B-/Stable/--) proposed incremental $100 million first-lien term loan due 2028 does not affect our ratings or stable outlook on the company because we already incorporated this level of debt issuance in our prior analysis. The proposed loan upsize is fungible with the company's $725 million first-lien term loan tranche, which it originally issued in 2021 and subsequently upsized. FCG also maintains a separate, $360 million first-lien term loan tranche, which carries a higher interest margin. FCG intends to use the proceeds from this incremental loan to fund five acquisitions under letters of intent (LOI) and replenish the cash from its balance sheet that it used

... factors - FCG's capital structure comprises a $60 million revolving credit facility due 2026, $1,184 million (pro forma for the proposed upsize) of first-lien term loans due 2028, and a $160 million second-lien term loan due 2029. - Our simulated default scenario contemplates a default occurring in 2026 due to sharp revenue and margin declines arising from an economic contraction, increasing price competition, and operational inefficiencies. - We believe that the company's lenders would aim to maximize its value and pursue a reorganization rather than a liquidation in a default scenario. Therefore, we value FCG on a going-concern basis and apply a 5x multiple to our projected emergence EBITDA. Simulated default assumptions - Simulated year of default: 2026 - EBITDA at emergence: $139 million - EBITDA multiple: 5.0x - Jurisdiction: U.S. - Revolver facility assumed 85% drawn at default. Simplified waterfall - Gross enterprise value (EV): $696...

Bulletin