Credit Rating for Debt in an LBO
What is the typical credit rating that private equity firms seek to have their debt rated? Is there any typical range?
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depends a lot on the tranche, seniority of the debt etc (senior secured vs subs), but i have never seen LBO debt rated investment grade so for a general guideline id say BB-CCC.
Concur with above post.
You want it to be rated as high as possible to get a lower spread against LIBOR/Prime but it'll most likely be junky. Lot of unrated stuff in the market as well (beware of those loans).
Most of our senior debt is shadow rated at BBB
BBB is investment grade. how do you have IG bond in an lbo transaction?
most lbo debt is rated Ba to B range even if its a bank deal
I would say most LBOs target at least B2/B for the CFR, occasionally you get lucky with a B1/B+ but that's usually an exceptionally good credit or the LBO has a conservative cap structure
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