Belden Inc. Subordinated Debt Rating Raised To #BB-# On Secured Debt Payoff (Recovery: 5); New Subordinated Debt Rated

Stocks and Financial Services Press Releases Tuesday October 4, 2016 16:41
NEW YORK--4 Oct--S&P Global Ratings

NEW YORK (S&P Global Ratings) Oct. 4, 2016--S&P Global Ratings today raised its issue-level rating to 'BB-' from 'B+' on the subordinated debt of St. Louis-based cable, connector, and networking provider Belden Inc. and revised its recovery rating on the debt to '5' from '6'. The '5' recovery rating reflects our expectation for modest recovery (10% to 30%; lower half of the range) in the event of payment default. We also assigned a 'BB-' issue-level rating and a '5' recovery rating to the company's new 10-year senior subordinated notes, the same ratings as on its existing senior subordinated debt. We understand that the company will use the proceeds along with balance sheet cash to repay its senior secured term loan. We will withdraw our ratings on the term loan following the close of the transaction. Our 'BB' corporate credit rating and stable outlook are unchanged.

The rating action reflects our view of the elimination of senior secured debt in the capital structure (the company's $400 million asset-based revolving credit facility will remain) and the corresponding improvement in expected recovery for senior subordinated lenders. We could lower our senior subordinated ratings if the company adds priority debt in the future.

Key analytical factors

Our simulated default scenario assumes a default in 2021 as a result of a weak economic environment and heightened competitive factors. In addition, unfavorable commodity prices and unproductive business investment would contribute to a default under our scenario.

We assume that the company's mandatorily convertible preferred securities convert to equity in 2019, prior to our assumed default in 2021.
We continue to value the company on a going concern basis, applying a 5x EBITDA multiple to an estimated emergence EBITDA of $144 million.
Simulated default assumptions
Simulated year of default: 2021
EBITDA at emergence: $144 million
EBITDA multiple: 5x
The asset-based facility is 60% drawn at default
Simplified waterfall
Net enterprise value (after 5% administrative costs): $685 million
Valuation split in % (obligors/nonobligors): 65/35
Asset-based facility and other priority claims: $377 million
Value available to subordinated lenders: $308 million
Subordinate debt claims: $1.7 billion
--Recovery expectations: 10% to 30% (lower half of the range)
Note: All debt amounts include six months of prepetition interest.

The 'BB' corporate credit rating reflects our view that leverage is likely to fall below 4x over the next 12 months, from the low 4x area as of July 3, 2016, due to cost reductions and management's commitment to achieve net leverage of 3x or lower (management methodology) in 2016. We treat the company's mandatorily convertible preferred equity as debt, but will change the treatment to equity when the preferred equity is within two years to conversion, which will occur in less than one year, per our criteria for treatment of convertible securities for companies with ratings in the 'BB' rating category. We believe this will provide the company with the financial flexibility to pursue modest acquisitions while maintaining leverage below our 4x downside threshold.

For the complete corporate credit rating rationale, see our report published July 20, 2016, on RatingsDirect.

Latest Press Release

Permission to Issue Baht-denominated Bonds or Debentures by Foreign Entity in Thailand during 1stMay 2019 31stJanuary 2020

Pursuant to the Ministry of Finance's Ministerial Notification re: Permission to Issue Baht-Denominated Bonds or Debentures in Thailand on the 11th April 2006 and four amendments, which stipulates criteria for permission to issueBaht-denominated bonds or...

Ontario Teachers# to invest in global disruptive technology through new innovation platform

Ontario Teachers' Pension Plan (Ontario Teachers') is pleased to announce it is launching a new investment department, Teachers' Innovation Platform (TIP). TIP will focus on late-stage venture capital and growth equity investments in companies that use...

Photo Release: 2019 GL Annual General Shareholders Meeting

Group Lease Public Company Limited (GL) led by Mr. Skol Harnsuthivarin (5th from left), Chairman of the Board of Director, Mr. Tatsuya Konoshita (6th from left), Chief Executive Officer together with the Board of Directors held the 2019 Annual General...

Photo Release: EXIM Thailand Holds FX Risk Management Phase 2 e-Learning To Promote FX Risk Hedging Tools for SME Exporters

Mr. Chana Boonyachai (left), Executive Vice President of Export-Import Bank of Thailand (EXIM Thailand), recently took a group photo with Ms. Vachira Arromdee (center), Assistant Governor, Financial Markets Operations Group of the Bank of Thailand (BOT),...

Guangdian Capital (GDC) Backed Mountain Top Receives Investment from China#s Tech Giant ByteDance

In March 2019, China's tech giant ByteDance has invested in Mountain Top, a leading talent agency in China. The previous funding round of Mountain Top was led by Guangdian Capital ("GDC"), which has invested RMB 100 million in the company back in 2016....

Related Topics