Moody's assigns B2 to SupplyOne, loan

Moody's Ratings said it assigned a first-time B2 corporate family rating and a B2-PD probability of default rating to SupplyOne, Inc. The agency also assigned a B2 rating to the planned $770 million backed senior secured first-lien term loan B. SupplyOne also plans to secure a $120 million asset-based lending revolver the agency will not be rating. The outlook is stable.

“SupplyOne's B2 CFR reflects the company's small scale as measured by revenues and elevated financial risk due to its acquisition-driven growth strategy and private equity ownership. Pro forma for the proposed dividend recapitalization and two recent acquisitions, SupplyOne's debt/EBITDA as adjusted by Moody's was 5x at the end of 2023.

“We expect pro forma EBITA/interest coverage around 2x. The company operates in a mature and fragmented packaging distribution market and has mainly grown through acquisitions, including 15 under the current sponsor. This strategy carries both financial and integration risks and it is our view that leverage is unlikely to decline over the intermediate term as the company pursues further bolt-on acquisitions, which constrains the rating,” Moody’s said in a press release.

The loan and cash on hand will be used to refinance debt and pay a dividend to the company's owner Wellspring Capital Management and to cover fees and expenses.

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