Moody's rates LMI loans B1

Moody's Investors Service said it assigned a B1 corporate family rating, a B2-PD probability of default rating and an SGL-2 speculative-grade liquidity rating to LMI Aerospace, Inc. and a B1 (LGD3, 34%) rating to its $100 million first-lien revolving credit facility due 2017 and $225 million first-lien term loan due 2018. The outlook is stable.

On Dec. 28, LMI completed the acquisition of Valent Aerostructures, LLC for about $246 million including assumed debt. The acquisition was primarily funded with the term loan and $15 million of equity issued to Valent.

The agency said the B1 corporate family rating reflects LMI's relatively high initial leverage following the acquisition (pro forma of roughly 4.5 times at Dec. 31), its small scale, its focus within the cyclical commercial aerospace sector and high customer concentrations.

Moody's analyst Brian Grieser said, "While initial leverage is viewed as high, LMI and Valent's combined backlog and earnings growth expectations, coupled with a commitment by LMI's management to conservative balance sheet management, is expected to support a meaningful reduction in financial leverage during 2013 and into 2014."

In Moody's view, the ratings favorably reflect LMI's cyclical growth prospects driven by increasing production rates of commercial aircrafts and increasing outsourcing by original equipment manufacturers and tier 1 suppliers.

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