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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

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Rating Action:

Moody's rates ARAMARK's holdco notes B3; outlook stable

04 Apr 2011

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
No Related Data.
© 2019 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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Moodys.com