Moody’s rates Hoffmaster facilities B2, Caa2

Moody's Investors Service said it assigned Hoffmaster Group, Inc. (New) a B3 corporate family rating and a B3-PD probability of default rating.

At the same time, the agency assigned a B2 rating to the company's proposed first-lien credit facilities, which are comprised of a $390 million term loan and $50 million revolving credit facility, and assigned a Caa2 rating to the proposed $125 million second-lien term loan.

The outlook is stable.

At the close of the transaction, all ratings for the pre-LBO rated entity Hoffmaster Group, Inc. will be withdrawn.

Hoffmaster is in the process of being purchased in a sponsor to sponsor transaction by private equity firm Wellspring Capital Management (from Metalmark Capital) for total consideration of about $710 million. Proceeds from the proposed $390 million first-lien term loan and proposed $125 million second-lien term loan, together with $184 million of sponsor contributed equity, will be used to fund the $665 million purchase price of the company, pay roughly $37 million in fees and expenses and fund $8 million of seasonal working capital.

"Hoffmaster's leverage pro forma for the proposed LBO is high and relatively weak for the B3 rating category. However, we expect the company will deleverage over the next few years using free cash flow for debt repayment and to a lesser extent from EBITDA growth," Moody's assistant vice president, analyst Brian Silver said in a news release.

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