Research Update: Lighting Solutions Provider Lumileds (Bright Bidco) Downgraded To 'B' On Planned Dividend Recap; Outlook Stable

Bright Bidco, the holding company of Lumileds, plans to raise an additional $300 million under its existing $1,383 million term loan B (TLB) facility to fund an equity distribution of $150 million and provide up to $150 million for bolt-on acquisitions, initially to be held as cash. This follows the June 2017 buyout by sponsor Apollo Global Management, LLC, which was funded by a $1,150 million TLB, with an additional dividend payment of $240 million funded by debt in August 2017. We view this further dividend recapitalization as constraining future deleveraging, which limits improvements in Bright Bidco's credit quality, and highlights the risk of further such payments in the future. We are lowering our ratings on Bright Bidco to 'B'

...+ Bright Bidco, the holding company of Lumileds, plans to raise an additional $300 million under its existing $1,383 million term loan B (TLB) facility to fund an equity distribution of $150 million and provide up to $150 million for bolt-on acquisitions, initially to be held as cash. + This follows the June 2017 buyout by sponsor Apollo Global Management, LLC, which was funded by a $1,150 million TLB, with an additional dividend payment of $240 million funded by debt in August 2017. + We view this further dividend recapitalization as constraining future deleveraging, which limits improvements in Bright Bidco's credit quality, and highlights the risk of further such payments in the future. + We are lowering our ratings on Bright Bidco to 'B' from 'B+'. + The stable outlook reflects our expectations that the company will maintain a steady operating performance, with ongoing healthy, above average EBITDA margins, as well as positive free operating cash flow. We forecast leverage metrics to...

Research Update