Moody’s gives AAR, notes Ba2

Moody's Investors Service said it assigned ratings to AAR Corp., including a Ba2 corporate family rating and Ba2-PD probability of default rating. Concurrently, the agency assigned a Ba2 rating to the company's planned senior unsecured notes due 2029 and an SGL-2 speculative grade liquidity rating. The outlook is stable.

The company will use the proceeds and incremental revolver borrowings to fund the previously announced acquisition of Triumph Group, Inc.'s product support business. Simultaneously, the company will increase its unsecured revolving credit facility to at least $795 million from $620 million.

“The Ba2 CFR reflects the company's competitive position in commercial and defense aerospace aftermarkets, primarily serving maintenance and repair and spare parts needs across a diverse customer base. Consolidation of Triumph's product support business will broaden AAR's offerings in aviation repair and support modest expansion of profit margins. The acquisition's service facility located in Chonburi, Thailand will provide an opportunity for AAR to grow its business in the Asia-Pacific market. Credit metrics pro forma for the acquisition support the ratings assignment,” Moody’s said in a press release.

The agency said it expects AAR’s adjusted debt/EBITDA at 4x at close but declining to 3x through fiscal 2026 as the company uses free cash flow to repay revolver draws. Moody's forecasts free cash flow to debt of at least 5% for fiscal 2025, or at least $50 million and growth from there in fiscal 2026.

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