Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's Affirms Service King's CFR and Assigns Rating to Proposed Add-on; Outlook Stable

Global Credit Research - 11 Aug 2016

Approximately $1.1 billion of debt affected

New York, August 11, 2016 -- Moody's Investors Service ("Moody's") affirmed Midas Intermediate Holdco II, LLC's ("Service King") B2 Corporate Family Rating (CFR) and B2-PD Probability of Default Rating (PDR), as well as the Ba3 rating on the company's senior secured credit facilities and the Caa1 rating on the company's unsecured notes, following the announced $75 million add-on to the company's notes. Moody's also assigned a Caa1 rating the new $75 million add-on. The outlook remains stable.

The affirmation of the CFR reflects Moody's expectation that the additional $75 million will be used to fund future acquisitions in Service King's pipeline consistent with the company's acquisition history (in terms of purchase multiples and scale), which will help bring credit metrics back in line with the company's B2 rating. Moody's estimates leverage pro-forma for the proposed transaction at around 8.0 times for the LTM period ended April 2, 2016 (after adjusting for some acquisition related costs and the expected full year impact of acquired stores), which is high for the rating category. However, the rating agency expects continued solid operating performance that includes meaningful topline growth driven by positive same store sales and new store acquisitions, as well as margin and EBITDA improvements that will drive pro-forma leverage below 7 times over the next 24 months.

In affirming Service King's rating, Moody's considered the company's track record of profitably integrating newly acquired stores, as well as expected cost savings and improved performance at its stores owing to better supplier contracts, systems upgrades, corporate advertising, and increased insurance carrier relationships. The B2 CFR also reflects Moody's expectations that the company will not pursue any shareholder distributions or issue additional debt over the next 12-24 months as this transaction, combined with prior debt increases, will be sufficient to fund acquisitions over the period. Additional debt raises or shareholder distributions over the near term could pressure the rating.

"While LTM credit metrics are weak for the rating category, the company's formidable market position and track record of successfully acquiring and integrating new stores should allow for meaningful credit metric improvement over the next 12-24 months," said Moody's analyst Dan Altieri.

Moody's took the following rating actions today:

Issuer: Midas Intermediate Holdco II, LLC

Corporate Family Rating, Affirmed at B2

Probability of Default Rating, Affirmed at B2-PD

$100 Million Senior Secured Revolving Credit Facility due 2019, Affirmed at Ba3 (LGD2)

$555 Million Senior Secured Term Loan B due 2021, Affirmed at Ba3 (LGD2)

$25 Million Senior Secured Delayed Draw Term Loan due 2021, Affirmed at Ba3 (LGD2)

$40 Million Senior Secured Delayed Draw Term Loan B due 2021, Affirmed at Ba3 (LGD2)

$300 Million Senior Unsecured Notes due 2022, Affirmed at Caa1 (LGD5)

$75 Million Senior Unsecured Notes due 2022, Assigned at Caa1 (LGD5)

Outlook, Remains Stable

RATINGS RATIONALE

Service King's B2 CFR reflects the company's high leverage and modest interest coverage. Moody's estimates lease adjusted leverage at around 8.0 times for the LTM period ended April 2, 2016. However given the company's solid history of operating performance and track record of integrating new acquisitions, Moody's expects pro-forma credit metrics will migrate to a level more in line with the B2 rating over the next 12-24 months. In addition, the ratings derive support from the company's formidable market position in a highly fragmented segment, and from its relationships with a large number of prominent insurance carriers which drives demand and provides stability to operating performance.

The company's liquidity profile is good, supported by approximately $180 million in cash pro-forma for the proposed transaction, as well as Moody's expectation for positive free cash flow over the next 12-18 months (before accounting for acquisitions). In addition to meaningful balance sheet cash, Service King has access to an undrawn $100 million revolver due 2019, which Moody's does not anticipate the company will draw on over the next 12-18 months. The revolver contains a springing first lien net leverage covenant which is tested if greater than 30% of the revolver commitment is outstanding. Moody's does not expect this covenant will be triggered, but anticipates sufficient cushion if it were tested.

The Ba3 ratings assigned to Service King's $100 million senior secured revolver and $613 million of senior secured term loans (including the delayed draw term loans), reflect their senior position in the capital structure, relative to the company's $375 million senior unsecured notes (rated Caa1) and other junior claims, including trade payables, operating leases and earnout notes. The term loans and revolver are secured by a first lien on substantially all assets of the company.

The stable outlook reflects Moody's expectation for improving credit metrics over the next 12-24 months as recent and future acquisitions support revenue, EBITDA, and margin improvement.

Given that credit metrics are weak for the rating category, an upgrade over the near term is unlikely. However, if the company is able to execute on its acquisitive growth strategy by driving meaningful revenue and EBITDA growth resulting in debt/EBITDA sustained below 5.5 times with EBIT/interest above 2.25 times, the ratings could be upgraded. An upgrade would also require the company to maintain its good liquidity profile and the expectation that financial policies will sustain metrics at these levels.

Ratings could be downgraded if operating performance is weaker than anticipated or the company faces challenges integrating new acquisitions, resulting in credit metrics sustained outside the range of the B2 rating or a weakening liquidity profile. Debt/EBITDA sustained around 7.0 times or interest coverage approaching 1 time could result in a downgrade. Moody's expects earnings from recently acquired stores will take 12-24 months post acquisition to be fully realized in the company's earnings.

The principal methodology used in these ratings was Retail Industry published in October 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Richardson, Texas, Midas Intermediate Holdco II, LLC is a leading provider of vehicle body repair services with revenue of around $1.0 billion through the LTM period ended April 2, 2016. The company operates under the Service King brand name and had 299 locations in 23 states as of April 2, 2016.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Daniel Altieri
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.