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09 Jun 2006
MOODY'S ASSIGNS FIRST TIME RATINGS TO BTAC MERGER CORP.; CORPORATE FAMILY RATING OF B2; OUTLOOK STABLE
Approximately $200 Million of Debt Securities Rated
New York, June 09, 2006 -- Moody's Investors Service assigned first time ratings to BTAC Merger
Corp.(dba "Baker & Taylor"). The ratings
are being assigned in connection with the proposed leveraged recapitalization
of BTAC Merger Corp. as a result of its acquisition by Castle Harlan.
The following ratings are assigned:
Corporate family rating at B2;
$200 million senior unsecured notes at B3 .
On May 10 , 2006, Castle Harlan and management signed a definitive
agreement to acquire Baker & Taylor for approximately $455
million. The transaction will be financed predominantly with debt
from the proceeds of the proposed $200 million senior unsecured
notes and borrowings under the proposed asset based revolver, as
well as from an equity contribution by Castle Harlan. The initial
borrower of the asset based revolver and issuer of the unsecured notes
will be BTAC Merger Corp. with upstream guarantees provided by
Baker & Taylor Acquisitions Corp. and its wholly owned domestic
subsidiaries; including Baker & Taylor Corporation. Upon
closing of the transaction, BTAC Merger Corp. will merge
with and into Baker & Taylor Acquisitions Corporation. The
surviving entity will be Baker & Taylor Acquisitions Corporation.
Upon closing the ratings assigned to BTAC Merger Corp. will be
moved to the surviving entity, Baker & Taylor Acquisitions Corporation.
The B2 corporate family rating is primarily driven by the company's
weak credit metrics, debt heavy capital structure, and private
equity sponsor influenced financial policy which constrain the rating
category despite certain aspects of its business franchise factors that
could support a higher rating category. Pro forma for the proposed
transaction the company will be highly levered with weak interest coverage
and weak free cash flow generation. Its credit metrics are consistent
with the single-B or lower rating categories. The company's
has a history of leveraged recapitalizations. The most recent leveraged
recapitalization prior to the current transaction was the acquisition
of the company by Willis Stein in 2003 .
The rating outlook is stable. Positive rating pressure could develop
should the company sustain FCF/Debt above 5% and EBIT/Interest
Expense above 1.5x. Negative rating pressure could develop
should the company's liquidity deteriorate or operating performance
decline such that free cash flow remained consistently negative or Debt/EBITDA
rose above 6.5x and EBIT/Interest Expense fell below 1.0x.
The senior unsecured notes (at B3) are rated one notch below the corporate
family rating reflecting their junior position to the asset based facility.
The senior unsecured notes will be guaranteed by each subsidiary that
is either a borrower or guarantor under the asset based revolving credit
BTAC Merger Corp. and its direct subsidiary Baker & Taylor
Acquisitions Corp. are holding companies whose sole asset is Baker
& Taylor Corporation. Baker & Taylor Corporation,
headquartered in Charlotte, NC, is a leading domestic and
international distributor of books and entertainment products to libraries
Corporate Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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