Moody's affirms NXT Capital on add-on

Moody's Investors Service said NXT Capital, Inc.'s senior secured term loan B was maintained at a B1 rating after the company increased the size of the loan to $375 million through a $75 million add-on.

The transaction does not affect NXT's B1 corporate family rating. The outlook remains positive.

The B1 rating of NXT's senior secured term loan reflects the loan's priority in NXT's capital structure, Moody's said, as well as the coverage provided by a pledge of holding company assets including stock in subsidiaries.

The loan is guaranteed by certain subsidiaries and governed by covenants, including a maximum debt-to-equity ratio of 4.5x, the agency said.

The proceeds of the $75 million add-on will be used by NXT to fund a distribution to shareholders, Moody's said.

The agency said it expects that this will increase NXT's leverage to 3.1x on a pro forma basis from 2.6x as of the end of December 2016.

The ratings reflect the company's modest, but strengthening franchise positioning in U.S. middle market and commercial real-estate lending, Moody's said.

Credit concerns include NXT's reliance on secured funding, modest alternate liquidity and competitive disadvantages versus more established finance companies and regional, the agency said.

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