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Genuine Financial Holdings LLC Assigned ‘B’ Corporate Credit Rating Following Corporate Risk Holdings Acquisition

          TORONTO (S&P Global Ratings) June 13, 2018-- S&P Global Ratings today assigned its 'B' corporate credit rating to Genuine Financial Holdings LLC. The outlook is stable. 
          At the same time, we are assigning our 'B' issue-level and '3' recovery ratings to the company's proposed first-lien credit facilities, indicating our expectation for meaningful recovery (50%-70%; rounded estimate: 55%) in the event of payment default. 
          We also assigned our 'CCC+' issue-level and '6' recovery ratings to the company's proposed second-lien credit facility indicating our expectation for negligible recovery (0%-10%; rounded estimate: 0%) in the event of payment default. 
          Our ratings on Genuine Financial Holdings reflect its high debt leverage and sponsor ownership, narrow scope of operations, and participation in the highly competitive and fragmented background verification industry, which is subject to low barriers to entry and limited pricing power. We also considered the limited geographic and product diversity and inherent risks involved in the integration process, which may include operational missteps and customer attrition. These factors are partly offset by the company's leading market position and good customer relationships. We expect leverage to remain elevated over the next 12-18 months, with pro forma S&P Global Ratings' adjusted debt leverage in the low- to mid-7x area in 2018 before improving to the mid- to high-6x in 2019.
          The stable outlook reflects our expectation that the merger will proceed with limited interruption and impact to customer retention rates and operating performance. We expect the company to continue to achieve revenue and earnings growth, supplemented by some favorable contribution from synergies. We expect S&P Global Ratings debt leverage in the low- to mid-7x area in 2018. 
          We could lower the rating over the next year if our adjusted leverage rises to and remains above 7.5x, which could occur if the company experiences unexpected integration issues including customer attrition and cost overruns, and fails to achieve expected synergies. We could also lower the rating if earnings deteriorate from unforeseen operational or macroeconomic difficulties, leading to lower processing volumes, or if debt increases due to dividend distributions or acquisitions.
          Although unlikely over the next 12 months, we could consider an upgrade if our adjusted debt leverage improves to and remains around 5x. This could be achieved if the company applies excess cash flow to reduce debt and realizes better-than-expected revenue growth or higher-than-expected synergies.