Moody’s rates Gates notes Caa2, facilities B2

Moody's Investors Service said it changed Gates Global LLC’s outlook to stable from negative and affirmed its corporate family rating at B3, probability of default rating at B3-PD and existing senior unsecured debt rating at Caa2.

At the same time, the agency assigned a Caa2 rating to Gates' new senior unsecured notes due 2022 and a B2 rating to its senior secured bank facilities in light of a proposed $150 million tack-on to the senior unsecured bonds and contemplated €285 million ($300 million) incremental term loan, the proceeds of which will be used to reduce the existing dollar-denominated secured term facility.

The refinancing is expected to be about debt neutral.

As part of the transaction, the maturities on the rated senior secured facilities are expected to be extended.

The B2 rating on the existing senior secured debt is unaffected at this time and will be withdrawn upon completion of the transaction.

“Gates' financial leverage is expected to be elevated, in the high 6 times range (after Moody's standard adjustments), and its core products are exposed to cyclical end markets. Moody's anticipates that challenging demand conditions in Gates' primary industrial end markets (agriculture, infrastructure and oil & gas and mining) and foreign exchange headwinds will continue to pressure revenue and profitability at least through 2017,” the agency said in a news release.

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