OREANDA-NEWS. S&P Global Ratings today revised its recovery rating on Irving, Texas-based PriSo Acquisition Corp.'s (PrimeSource Building Products Inc.) $355 million first-lien term loan due 2022 to '3' from '2' and lowered the issue-level rating on the loan to 'B' from 'B+'. The rating changes come as a result of the company's proposed $75 million add-on to the term loan. We also affirmed our 'CCC+' issue-level rating on PrimeSource's existing senior unsecured notes, with a '6' recovery rating, which includes the company's proposed $75 million add-on to the existing $200 million senior notes due 2023. The company will use proceeds of the new debt, as well as $75 million drawn on its asset-based lending facility, to fund a special dividend to its financial sponsor owners. The '3' recovery rating on the term loan indicates our expectation for meaningful (50%-70%, at the upper half of the range) recovery in the event of a payment default. The '6' recovery rating on the senior note indicates our expectation for negligible (0%-10%) recovery in the event of a payment default.

While the transaction raises leverage, our ratings incorporate an expectation that leverage would remain in the 5x-6x range and that the financial policy would remain aggressive under financial sponsor ownership. Despite the increase in debt, we continue to expect the company to generate meaningful free cash flow. Our ratings also reflect the company's position as a leading two-step distributor, moderate customer and supplier concentration, and exposure to residential construction and repair and remodel markets.

The corporate credit rating on PrimeSource is 'B' with a stable outlook. For the corporate credit rating rationale on PrimeSource, see the summary analysis published May 24, 2016 on RatingsDirect.