New York, March 18, 2021 -- Moody's Investors Service, ("Moody's") assigned
first-time ratings to AIT Worldwide Logistics Holdings, Inc.
("AIT") including a B2 to the $415 million senior secured
first lien term loan and the $80 million revolving credit facility,
a B3 corporate family rating (CFR), and a B3-PD probability
of default rating (PDR). The ratings outlook is stable.
Proceeds from the $415 million first lien term loan, along
with a $125 million second lien term loan (unrated) and cash equity,
will be used to finance the purchase of a majority stake of AIT by the
private equity firm The Jordan Company.
The following rating actions were taken:
Assignments:
..Issuer: AIT Worldwide Logistics Holdings,
Inc.
.... Corporate Family Rating, Assigned
B3
.... Probability of Default Rating,
Assigned B3-PD
....Senior Secured 1st Lien Bank Credit Facility,
Assigned B2 (LGD3)
Outlook Actions:
..Issuer: AIT Worldwide Logistics Holdings,
Inc.
....Outlook, Assigned Stable
RATINGS RATIONALE
AIT's ratings reflect the company's elevated financial leverage,
moderate scale within a very competitive industry, and a strategy
of debt-funded acquisitions which Moody's anticipates to
continue. Moody's expects high financial leverage with about
6.5x debt/EBITDA for year-end December 31, 2020 on
a pro forma basis for the company's new capital structure and recent
acquisitions. This starting leverage profile under new ownership
is high which, in Moody's view, reduces the company's
capacity for sizeable acquisitions in the near-term at the present
rating level.
Moody's expects a combination of steady earnings growth balanced
by likely debt-funded acquisitions, albeit at a slower pace
than previous years, will keep leverage near 6x debt/EBITDA over
the next couple years. The segment of the logistics market that
AIT operates in is highly competitive, yet fragmented, which
provides AIT with many opportunities to grow inorganically and increase
its scale.
AIT's credit profile benefits from the company's capabilities
to provide varied modes of freight forwarding, including air,
ocean and ground, a largely international presence to support global
trade and customs brokerage and a very diverse set of customers and transportation
providers. AIT provides services for customers operating in end
markets with favorable growth prospects including e-commerce,
life sciences, and technology. In addition, AIT maintains
minimal exposure to any single carrier which allows for the company to
procure competitive transportation rates. Moody's expects
that AIT will be able to continue to pass on freight cost increases,
especially for air freight which continues to be elevated at this time.
Moody's expects liquidity to be adequate as the $80 million revolver
will initially be undrawn, and free cash flow will be moderately
positive given the minimal capital expenditure requirements for the non-asset
based business. Moody's anticipates that AIT will apply the
majority of free cash flow toward acquisitions and may utilize the revolver
as well for inorganic growth, which will at times reduce the company's
liquidity.
In terms of corporate governance, event risk remains high for aggressive
financial policies given private equity ownership and the company's acquisitive
nature. Given the fragmented nature of the industry, further
acquisitions are expected and could increase leverage or weaken liquidity
depending on the pace and size of acquisitions.
The stable outlook reflects Moody's expectation for AIT to maintain
financial leverage around 6x while continuing a prudent inorganic growth
strategy. The outlook also anticipates that AIT will maintain an
adequate liquidity profile, including positive free cash flow.
The B2 rating on the first lien senior secured credit facilities takes
into account this debt's priority position ahead of the second lien
term loan in the company's liability structure.
Below are proposed terms of the first lien credit agreement and the final
terms can be materially different.
Preliminary terms in the first lien credit agreement contain provisions
for incremental first-lien debt capacity up to 1) the greater of
an initially set EBITDA level and 100% of consolidated EBITDA as
defined over the prior four quarter period, plus 2) additional amounts
subject to pro forma first-lien net leverage of 5.0x (if
pari passu secured). In the case of additional junior secured debt,
the secured net leverage ratio does not exceed 6.5x and for unsecured
debt, the total net leverage ratio does not exceed 7.0x (or,
if used to finance a permitted acquisition or permitted investment,
such leverage tests in each case do not increase on a pro forma basis
from initial levels).
The asset sale proceeds prepayment requirement has leverage-based
step-downs to 50% and 0%, subject to pro forma
first lien net leverage reaching 4.5x and 4.25x, respectively.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if AIT demonstrates a measured approach
toward acquisitions such that the company maintains operating leverage
to support EBITDA margins nearing 10% and debt/EBITDA sustained
below 5x. Maintaining positive free cash flow generation with free
cash flow-to-debt in the high single-digits range
could also result in an upgrade.
The ratings could be downgraded if loss of customers from weakening execution,
or if a debt-funded acquisition strategy in excess of what the
company has historically demonstrated result in financial leverage approaching
7x debt/EBITDA. In addition, the ratings could be downgraded
if AIT is unable to generate positive free cash flow or availability on
its revolving credit facility is materially reduced.
AIT Worldwide Logistics Holdings, Inc., based in Chicago,
IL, is a global third party logistics company providing end-to-end
supply chain services, including air and ocean freight forwarding,
expedited ground, truck brokerage, residential delivery,
customs brokerage, and other value-added logistics services.
Pro forma gross revenues were approximately $1.1 billion
for the year ended December 31, 2020.
The principal methodology used in these ratings was Surface Transportation
and Logistics published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113382.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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.
Mike Cavanagh
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
