Moody's assigns DexKo loans B1

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to DexKo Global, Inc. Concurrently, Moody's assigned B1 ratings to the company's planned first-lien credit facilities and a Caa1 rating to its proposed senior unsecured notes.

The first-lien credit facilities consist of a $200 million revolver, an $800 million term loan and a €950 million term loan. The facilities also provide for delayed-draw term loans for an additional $160 million and €100 million, respectively.

The proceeds and common equity will be used to finance the purchase of DexKo by Brookfield Business Partners LP in a transaction valued at about $3.4 billion. Following the close of this transaction, the debt currently rated at DexKo Global Inc. will be repaid and those ratings will be subsequently withdrawn.

“DexKo's ratings reflect the company's high financial leverage, exposure to cyclical end markets, and a relatively aggressive acquisition strategy. Following the buyout by Brookfield and acquisition of European-based Brink, DexKo's debt/EBITDA is expected to peak at about 7.5x at the end of 2021, which is elevated for the current rating. Moody's expects DexKo's financial leverage to improve to 6.5x through 2022 while the company remains active in pursuing acquisitions,” the agency said in a press release.

The outlook is negative.

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