Moody’s affirms Compass on acquisition

Moody's Investors Service said it affirmed Compass Group Diversified Holdings LLC's Ba3 corporate family rating and B1-PD probability of default rating.

Concurrently, the agency affirmed the Ba3 ratings on the company's senior secured credit facilities, consisting of a proposed $575 million term loan B due June 2021 (upsized from $325 million in connection with this transaction) and proposed $550 million revolving credit facility due June 2019 (upsized from $400 million in connection with this transaction).

In addition, Moody's affirmed the company's SGL-2 speculative grade liquidity rating.

The outlook remains stable.

Proceeds from the transaction and an associated sale of equity in a minority holding will be used to fund the $400 million acquisition of 5.11 Tactical and pay fees and expenses of about $7 million.

"Compass' credit metrics, pro forma for incremental debt associated with the announced acquisition of 5.11 Tactical, are currently weak for the Ba3 rating, but we expect the company to delever at a healthy pace over the next 12 to 18 months, driven largely by debt repayment from free cash flow generation" Moody’s assistant vice president, analyst Brian Silver said in a news release.

"The acquisition of 5.11 Tactical will increase Compass' size while improving its already solid business diversification profile, and we believe the acquired entity has good growth potential going forward."

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