ข่าวประชาสัมพันธ์การเงิน/หลักทรัพย์

Output Services Group Inc. ‘B’ Rating Affirmed On Add-Ons, Outlook Stable; Debt Ratings Affirmed

          NEW YORK (S&P Global Ratings) Sept. 13, 2018--S&P Global Ratings today affirmed its 'B' issuer credit rating on Output Services Group Inc. The outlook is stable.
          At the same time, we affirmed our 'B' issue-level rating on Output Services Group Inc.'s senior secured facility. The senior secured facility includes a $15 million revolving credit facility due 2023, a $291.9 million first-lien term loan due 2024, and a $100 million delayed draw term loan due 2024 (we expect $50 million to remain undrawn at the time of closing). The recovery rating on the facility remains '3', indicating our expectation for meaningful (50% to 70%; rounded estimate: 55%) recovery in the event of default. We assigned a 'CCC+' issue-level rating and '6' recovery rating to the company's $52.5 million second-lien term loan due 2025. The '6' recovery rating indicates our expectation for negligible (0% to 10%; rounded estimate: 0%) recovery in the event of default.
          Our rating affirmation is based on our expectation that Output Service Group will continue to expand its earnings profile, generate moderate free cash flow, and improve its credit metrics over the next year despite a near-term decline related to a series of contracted tuck-in acquisitions. Over the past few years, the company has made substantial investments in its platform and improvements in cost efficiencies to support its aggressive growth strategy. We expect this to translate into improved operating leverage and facilitate enhanced scale going forward. We estimate pro forma adjusted debt leverage will be in the mid-to-high-8x area for the fiscal year ending Dec. 31, 2018, before improving to the low-7x area by year-end 2019. Due to its recent acquisitions, we expect the company to generate negative free operating cash flow (FOCF) of $15 million to $20 million by the end of 2018. However, we expect the company to generate at least $15 million in positive free cash flow by the end of 2019.
          The stable outlook reflects our expectation that increased operational efficiency from previous platform investments, scale-driven economics, and contributions from contracted acquisitions will support EBITDA margin expansion and deleveraging over the next year. Despite the added interest expense from the incremental debt issuance, we expect the company to generate at least $15 million in free cash flow over the next year. 
          We could lower the rating over the next year if debt to EBITDA remained above 7x or FOCF to debt failed to improve beyond the low-single-digit percent area. We believe this could occur if the company demonstrated more aggressive financial policies by making additional debt-financed acquisitions rather than actively deleveraging. We could also lower the ratings if operating performance deteriorated, such as EBITDA margins declining to the low-to-mid teen percentage area due to unmet revenue expectations or losses in market share to larger competitors. 
          While unlikely, we would consider raising the rating if OSG were to significantly increase its scale and maintain solid operating performance, while committing to and maintaining leverage below 5x on a sustained basis.