Research Update: CDK Global Inc. Downgraded To 'B+' On Leveraged Buyout; Outlook Stable, New Debt Rated

Hoffman Estates, Ill.-based U.S. auto dealer information technology (IT) solutions provider CDK Global Inc. will be acquired by Brookfield Business Partners for about $8 billion. The transaction will be funded with a new first-lien term loan, other first-lien secured debt, a privately placed second-lien term loan (not rated), and common equity. S&P Global Ratings pro forma adjusted leverage will rise and remain over 7x over the next 12 months, from about 3x for the 12-month period ending March 31, 2022. As a result, we lowered our issuer credit rating on CDK to 'B+' from 'BB+'. In addition, we lowered our unsecured notes issue-level and recovery ratings to 'B-' and '6' respectively, from 'BB+' and '3'. We assigned 'B+' and '3'

...- Hoffman Estates, Ill.-based U.S. auto dealer information technology (IT) solutions provider CDK Global Inc. will be acquired by Brookfield Business Partners for about $8 billion. - The transaction will be funded with a new first-lien term loan, other first-lien secured debt, a privately placed second-lien term loan (not rated), and common equity. - S&P Global Ratings pro forma adjusted leverage will rise and remain over 7x over the next 12 months, from about 3x for the 12-month period ending March 31, 2022. - As a result, we lowered our issuer credit rating on CDK to 'B+' from '##+'. - In addition, we lowered our unsecured notes issue-level and recovery ratings to 'B-' and '6' respectively, from '##+' and '3'. We assigned 'B+' and '3' issue-level and recovery ratings to the new first-lien credit facility. - The stable outlook reflects our expectation CDK will continue to grow organic revenues in the mid-single-digit-percent area annually. We forecast its EBITDA margins will expand toward...

Research Update