Approximately $1.1 billion of newly rated debt
New York, April 04, 2011 -- Moody's Investors Service assigned a B3 to the $600 million of
proposed senior notes of ARAMARK Holdings Corporation (ARAMARK Holdings)
and a Ba3 to the proposed amended revolving credit facility of ARAMARK
Corporation (ARAMARK). ARAMARK Holdings is the holding company
parent of ARAMARK. ARAMARK's B1 Corporate Family Rating,
B1 Probability of Default Rating and SGL-2 Speculative Grade Liquidity
rating were affirmed and transferred to ARAMARK Holdings, the borrower
under the proposed senior notes. The rating outlook is stable.
The company plans to use the proceeds from the $600 million note
offering and approximately $133 million of borrowings under an
amended revolver to fund a $712 million dividend to shareholders
and pay related fees and expenses.
Moody's assigned the following ratings (LGD assessments):
ARAMARK Holdings-
$600 million senior unsecured notes due 2016, B3 (LGD 6,
95%)
Corporate Family Rating, B1
Probability of Default Rating, B1
Speculative grade liquidity rating, SGL-2
ARAMARK Corporation:
$500 million senior secured amended revolver, Ba3 (LGD 3,
30%)
Moody's affirmed the following ratings (LGD assessments):
ARAMARK Corporation:
$165 million (down from $600 million) senior secured revolver
due 2013, Ba3 (to LGD 3, 30% from LGD 3, 34%)
$200 million senior secured letter of credit facility due 2014/2016,
Ba3 (to LGD 3, 30% from LGD 3, 34%)
$1.9 billion senior secured term loan due 2014, Ba3
(to LGD 3, 30% from LGD 3, 34%)
$1.4 billion senior secured term loan due 2016, Ba3
(to LGD 3, 30% from LGD 3, 34%)
$1.3 billion senior unsecured 8.5% notes due
2015, B3 (to LGD 5, 78% from LGD 5, 84%)
$500 million senior unsecured floating rate notes due 2015,
B3 (to LGD 5, 78% from LGD 5, 84%)
$250 million senior unsecured 5% notes due 2012, B3
(to LGD 6, 92% from LGD 6, 96%)
Moody's withdrew the following ratings:
ARAMARK Corporation-
Corporate Family Rating, B1
Probability of Default Rating, B1
Speculative grade liquidity rating, SGL-2
The Corporate Family Rating, Probability of Default Rating and Speculative
Grade Liquidity ratings were withdrawn at the ARAMARK Corporation level
and assigned at the ARAMARK Holdings Corporation level.
RATINGS RATIONALE
"The proposed financing and dividend will increase pro forma debt
to EBITDA to 6.5 times at December 31, 2010, a leverage
level that is high for a B1 rated service company. The affirmation
of the B1 CFR reflects Moody's expectation that ARAMARK will reduce
debt to EBITDA to the mid 5 times over the next 12 to 18 months",
stated Lenny Ajzenman, Senior Vice President.
The CFR remains constrained by high financial leverage, modest free
cash flow to debt and sensitivity of the company's uniform,
business and industry, and sports and entertainment service lines
to changes in employment levels and discretionary consumer spending.
The ratings are supported by the company's leading market positions,
significant geographic, customer and end market diversity,
and solid financial performance of the company's less cyclical business
lines during the economic downturn.
The stable outlook reflects Moody's expectation of low single digit
organic revenue growth and a moderate improvement in EBITDA over the next
year driven by slowly improving conditions across most service lines and
a continued focus on efficiency gains.
The ratings could be downgraded if the company fails to materially improve
credit metrics over the next 12 to 18 months. Specifically,
a downgrade is possible if debt to EBITDA is not reduced to less than
6 times by the end of fiscal 2012 (year ending September 30) or free cash
flow to debt is expected to be sustained below 2%.
Given the company's high leverage pro forma for the financing and
dividend, upward rating momentum in unlikely in the near term absent
a de-levering event such as an IPO. Over the intermediate
term, the ratings could be upgraded if the company achieves sustained
revenue and profitability growth and demonstrates conservative financial
policies such that Moody's expects debt to EBITDA to be sustained
at or below 4.5 times.
For further details, refer to Moody's Credit Opinion for ARAMARK
on Moodys.com.
The principal methodologies used in this rating were Global Business &
Consumer Service Industry published in October 2010, and Loss Given
Default for Speculative-Grade Non-Financial Companies in
the U.S., Canada and EMEA published in June 2009.
ARAMARK, headquartered in Philadelphia, Pennsylvania,
is a leading provider of a broad range of managed services to business,
educational, healthcare and governmental institutions and sports,
entertainment and recreational facilities. The company's uniform
and career apparel business is the second largest in the United States
and provides both rental and direct marketing services. ARAMARK
Holdings Corporation is the holding company parent of ARAMARK.
The company is principally owned by a consortium of private equity sponsors
(GS Capital Partners, CCMP Capital Advisors, J.P.
Morgan Partners, Thomas H. Lee Partners and Warburg Pincus
LL) and the company's management team. Reported revenues
for the twelve month period ended December 31, 2011 were approximately
$12.7 billion.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's rates ARAMARK's holdco notes B3; outlook stable