Date: June 14, 2006
Source: McGraw Hill Companies Inc.
Standard & Poor's Ratings Services said that it assigned its 'BB-' corporate credit rating and stable outlook to Plano, Texas-based parts cleaning, oil recycling and re-refining, and industrial waste management company Safety-Kleen Systems Inc.
At the same time, Standard & Poor's assigned its 'BB-' bank loan rating and recovery rating of '3' to Safety-Kleen's $395 million senior secured credit facility. The credit facility will consist of a $100 million revolving credit facility due 2012, a $65 million letter of credit facility due 2013, and a $230 million term loan B due 2013. The 'BB-' bank loan rating is the same as the corporate credit rating. This and the '3' recovery rating indicate that lenders can expect meaningful (50%-80%) recovery of principal in the event of a payment default.
(For the complete recovery analysis, see "Recovery Report: Safety-Kleen Systems Inc.'s $395 Million Bank Financing," to be published on RatingsDirect immediately following the release of this report.)
"The ratings on Safety-Kleen reflect its aggressive capital structure without the benefit of a track record regarding financial policies," said Standard & Poor's credit analyst Robyn Shapiro. "They also reflect the company's relatively low profitability, and pricing and volumes that are somewhat vulnerable to industry cycles."
These factors are partially mitigated by the company's leading market positions in niche markets and its diversified customer base.
The company will use proceeds of the proposed term loan, together with proceeds of an equity rights offering of $115 million, to repay some outstanding balances, redeem some preferred equity, and pay related fees and expenses. The prefunded letter of credit facility will replace the company's existing letter of credit facility.
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.
Media Contact:
John Piecuch, New York (1) 212-438-1102;
john_piecuch@standardandpoors.com
Analyst Contact:
Robyn Shapiro, New York (1) 212-438-7224
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With more than 6,300 employees located in 21 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.
More information: www.standardandpoors.com, or www.safety-kleen.com.
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