Moody's assigns AM General LBO, notes B2

Moody's Investors Service said it assigned initial ratings to PM General Purchaser LLC, the entity through which AM General, LLC will be sold from one financial sponsor to another. A corporate family rating of B2, a probability of default rating of B2-PD and a B2 rating for $600 million of senior secured notes being arranged to augment equity funding of the acquisition.

"Initial credit metrics will be solid for the assigned rating level," said Bruce Herskovics, a Moody's vice president and lead analyst, in a press release. "But we also factor in AM General's dependence on a single, relatively mature product for which orders could materially decline with lower U.S. defense spending."

The company's bond heavy capital structure will make debt reduction unlikely for at least the next three years, he noted.

The B2 rating for the $600 million of senior secured notes is equivalent to the company's CFR, reflecting that the majority of debt in its consolidated capital structure is secured, and with a super-priority revolver ranking ahead of it and unsecured non-debt claims ranking behind it, the agency said. The notes will be guaranteed by all material domestic subsidiaries.

The outlook is stable.

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