PODS LLC #B+# Ratings Outlook New First-Lien Term Loan Rated #B+#

Stocks and Financial Services Press Releases Tuesday November 14, 2017 08:34
NEW YORK--22 Nov--S&P Global Ratings
NEW YORK (S&P Global Ratings) Nov. 13, 2017--S&P Global Ratings today affirmed its 'B+' corporate credit rating on Clearwater, Fla.-based portable storage lessor PODS LLC. The outlook is stable.

At the same time, we assigned our 'B+' issue-level rating and '4' recovery rating to the company's proposed $775 million first-lien term loan. The '4' recovery rating indicates our expectation for average recovery (30%-50%; rounded estimate: 35%) in the event of a default.

We also assigned our 'B+' issue-level rating and '4' recovery rating to the company's $50 million revolving credit facility. The '4' recovery rating indicates our expectation for average recovery (30%-50%; rounded estimate: 35%) in the event of a default.

Our affirmation of the company's corporate credit rating reflects our belief that PODS' financial performance can support the incremental debt intended to fund a dividend to its financial sponsor Ontario Teachers' Pension Plan (OTPP). The company's operating performance has improved over the last year due to continued acquisitions of successful franchisee operations and growth in its core retail business, which we expect to continue.

The stable outlook on PODs reflects our expectation that the company's financial profile will improve modestly over the next year pro forma for the debt-financed dividend, based on continued franchisee acquisitions and organic growth. We expect EBIT interest coverage in the low-1x area over this period.

We could lower our ratings on PODS over the next year if the company's financial profile declines such that its EBIT interest coverage falls to 1.3x and FFO to debt declines to below 13% for a sustained period. This could occur if the company's growth in key markets decreases or if its growth initiatives do not come to fruition.

An upgrade is unlikely over the next 12 months due to our expectation that sponsor ownership precludes sustained improvement of credit metrics. To raise the rating, we would expect OTPP to relinquish control over the medium term and the company's credit metrics to improve on a sustained basis, with EBIT interest coverage increasing to above 1.9x and FFO to debt to over 23%.

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