Moody’s rates Crash Champions B3

Moody's Investors Service said it assigned Champions Financing, Inc. (Crash Champions) a B3 corporate family rating and a B3-PD probability of default rating. The agency also assigned a B3 rating to Crash Champions' planned $650 million senior secured first-lien term loan due 2029, a B3 rating to its planned $650 million senior secured first-lien notes due 2029, and a B3 rating to its planned $250 million senior secured first-lien revolving credit facility expiring 2029, undrawn at close. The outlook is stable. The company is owned by Clearlake Capital Group.

Upon the close of a planned refinancing and repayment transaction, Moody's will withdraw the ratings of New SK Holdco Sub, LLC (Service King), including its Caa2 CFR, Caa2-PD PDR, Caa2 senior secured first-lien bank credit facility ratings and its stable outlook.

"The ratings assignment reflects the solid scale, improved credit metrics and adequate liquidity of Crash Champions and prospects for further improvement over the next 12-18 months as the company takes advantage of favorable industry demand dynamics, including growth in vehicle miles traveled and repair severity as well as growth opportunities in the high-margin scanning and calibration segment," said Stefan Kahandaliyanage, a Moody's vice president, in a press release.

"We expect operational improvements made by Clearlake at the legacy Service King business, including improved vehicle throughput and streamlined corporate-level and shop-level expenses, and investments in shop labor, equipment and technology to support Crash Champions' topline growth, earnings and positive free cash flow going forward," Kahandaliyanage added.

The proceeds from the senior secured debt issuance, together with proceeds from the expected issuance of $350 million of perpetual preferred securities by Crash Champions' direct parent, will be used to refinance and repay the credit facilities of New SK Holdco Sub, LLC and Crash Champions Intermediate and to pay related fees and expenses. Moody's said it expects the preferred securities to be issued primarily to affiliates of Clearlake, which is the company's majority equity owner, and the preferred dividend to be paid as payment in kind rather than in cash.

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