Realogy Group LLC Proposed Secured Credit Facility Rated 'BB+' (Recovery: 1); Unsecured Notes Rating Lowered To 'B'
NEW YORK (S&P Global Ratings) Jan. 17, 2018--S&P Global Ratings today assigned its 'BB+' issue-level rating and '1' recovery rating to Madison, N.J.-based residential real estate franchising and brokerage company Realogy Group LLC's proposed senior secured credit facility. The credit facility consists of a $1.4 billion revolver due 2023; and a $750 million term loan A due 2023; and a $1.08 billion term loan B due 2025. The proposed revolver commitment is $350 million higher than the company's existing $1.050 billion revolver, and the proposed term loan A facility combines the company's existing two tranches of term loan A debt into one tranche. In addition, the refinancing transaction pushes out maturity dates for the revolver, the term loan A and the term loan B. The company will use the proceeds of the new facilities to refinance its existing secured facilities. The '1' recovery rating reflects our expectation for very high recovery (90% to 100%; rounded estimate: 95%) for lenders in the event of a payment default. In addition, we lowered the issue-level rating to 'B' from 'B+' on the company's senior unsecured debt (consisting of three series including $450 million of notes due April 2019, $550 million of notes due December 2021, and $500 million of notes due 2023). We revised the recovery rating on the company's unsecured debt to '6' from '5'. The '6' recovery rating reflects our expectation for negligible recovery (0% to 10%; rounded estimate: 5%) for lenders in the event of a payment default. We took these rating actions on this debt because the incremental revolver commitment adds secured debt in the capital structure under our hypothetical default assumptions and impairs recovery prospects for unsecured lenders. Our 'BB-' corporate credit rating on Realogy is unchanged. The rating outlook is stable. For the complete corporate credit rating rationale, please see our summary analysis on Realogy, to be published as soon as practical following this release. RECOVERY ANALYSIS Key analytical factors
- Our recovery rating on Realogy's senior secured credit facility is '1' and our recovery rating on the senior unsecured notes is '6'.
- Our simulated default scenario contemplates a payment default in 2022 because of a substantial decline in cash flow from a depressed U.S. residential real estate market.
- We assume reorganization follow default, using a multiple of 6.5x emergence EBITDA to value the company.
Simplified waterfall
- Emergence EBITDA: $496 mil.
- Multiple: 6.5x
- Gross recovery value: $3.2 bil.
- Net recovery value for waterfall after admin expenses (5%): $3.1 billion
- Obligor/nonobligor valuation split: 100%/0%
- Estimated secured debt: $2.96 billion
- Value available for first-lien claims: $3.1 bil.
- —Recovery expectation: 90%-100% (rounded estimate: 95%)
- Estimated senior unsecured notes claim: $1.53 billion
- Value available for unsecured claims: $108 mil.
- —Recovery expectation: 0%-10% (rounded estimate: 5%)
Note: All debt amounts include six months of prepetition interest.
RELATED CRITERIA
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings , April 7, 2017
- Criteria - Corporates - General: Recovery Rating Criteria For Speculative-Grade Corporate Issuers, Dec. 7, 2016
- Criteria - Corporates - General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
- General Criteria: Group Rating Methodology, Nov. 19, 2013
- Criteria - Corporates - Industrials: Key Credit Factors For The Business And Consumer Services Industry, Nov. 19, 2013
- Criteria - Corporates - General: Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
- Criteria - Corporates - General: Corporate Methodology, Nov. 19, 2013
- General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
- General Criteria: Methodology: Industry Risk, Nov. 19, 2013
- General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012
- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
RATINGS LIST Realogy Group LLC Corporate Credit Rating BB-/Stable/-- New Rating Realogy Group LLC Senior Secured $1.4 bil. revolver due 2023 BB+ Recovery Rating 1(95%) $750 mil. term loan A due 2023 BB+ Recovery Rating 1(95%) $1.08 bil. term loan B due 2025 BB+ Recovery Rating 1(95%) Issue-Level Ratings Lowered; Recovery Ratings Revised To From Realogy Group LLC Realogy Co-Issuer Corp. Senior Unsecured B B+ Recovery Rating 6(5%) 5(20%)
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
Primary Credit Analyst: | Justin D Gerstley, CFA, New York (1) 212-438-1890; justin.gerstley@spglobal.com |
Secondary Contact: | Emile J Courtney, CFA, New York (1) 212-438-7824; emile.courtney@spglobal.com |
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