Research Update: Covanta Holding Corp. Term Loans B&C Rated 'BB'; (Recovery Rating: '1'); 'B+' Rating Affirmed Following Acquisition

Covanta Holding Corp. (Covanta) issued a $400 million term loan B (TLB) to finance part of its Circon Environmental (Circon) acquisition, with the balance being equity issued by the parent EQT Infrastructure (EQT). Covanta also issued a $30 million term loan C (TLC) to supplement its liquidity. The acquisition modestly increases Covanta's footprint and expands its suite of services, leading to higher EBITDA. We expect debt to EBITDA of about 6.4x-6.8x in 2023, declining to 5.8x-6.3x in 2024, and funds from operations (FFO) to debt of about 9%-11% in 2023 and 2024. S&P Global Ratings assigned its 'BB' rating to the TLB and TLC. At the same time, S&P Global Ratings affirmed all ratings including its 'B+' issuer credit rating

...- Covanta Holding Corp. (Covanta) issued a $400 million term loan B (TLB) to finance part of its Circon Environmental (Circon) acquisition, with the balance being equity issued by the parent EQT Infrastructure (EQT). Covanta also issued a $30 million term loan C (TLC) to supplement its liquidity. - The acquisition modestly increases Covanta's footprint and expands its suite of services, leading to higher EBITDA. We expect debt to EBITDA of about 6.4x-6.8x in 2023, declining to 5.8x-6.3x in 2024, and funds from operations (FFO) to debt of about 9%-11% in 2023 and 2024. - S&P Global Ratings assigned its '##' rating to the TLB and TLC. At the same time, S&P Global Ratings affirmed all ratings including its 'B+' issuer credit rating (ICR) on Covanta. - The '1' recovery rating on the company's senior secured debt indicates our expectation of very high recovery (90%-100%; rounded estimate: 95%). The '5' recovery rating on the company's senior unsecured debt is unchanged and indicates our expectation...

Research Update