Moody's rates Forward Air Ba3

Moody's Investors Service said it assigned first-time ratings to Clue OpCo LLC (a wholly owned subsidiary of Forward Air Corp.), including a Ba3 corporate family rating and Ba3-PD probability of default rating. Concurrently, the agency assigned a Ba3 rating to each of the company's planned $925 million senior secured first-lien term loan, $400 million senior secured revolver and $925 million of senior secured notes. Moody's assigned a stable outlook. Finally, Moody's gave an SGL-2 speculative grade liquidity rating.

“The rating reflects the elevated leverage associated with the planned acquisition of asset-light transportation operator Omni. The initial debt burden is moderately high for the company's business risk, given its direct exposure to the highly cyclical transportation sector, competitive pressures within the less-than-truckload (LTL) industry and the need for consistent capital investment on new equipment necessary to keep maintenance costs down, yet modest given the company's strategy of outsourcing to 3PL providers.

“The rating reflects the benefit of Forward Air's solid operating margin that Moody's expects will continue as the company focuses on the integration and build-out of its infrastructure to sustain its growth projections,” the agency said in a press release.

The proceeds from the term loan and secured notes will be used with about $1.2 billion in perpetual preferred shares, $565 million in common equity and about $150 million of cash to buy Omni Logistics, LLC for $3.2 billion and refinance existing debt at Forward Air.

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