Moody's rates KAR loan Ba3

Moody's Investors Service said it upgraded the corporate family rating of KAR Auction Services, Inc. to B1 from B2 and assigned a Ba3 (LGD3, 31%) rating to a proposed $1.75 billion senior secured credit facility, consisting of a $250 million senior secured revolver due 2016 and a $1.5 billion senior secured term loan due 2017. The speculative-grade liquidity rating was raised to SGL-1 from SGL-2 and the outlook was changed to stable.

KAR is seeking to refinance its existing $250 million revolver, $1.14 billion term loan, $131 million of subordinated notes and $200 million of its $450 million of 8¾% senior notes with a new $250 million revolver, a $1.5 billion term loan and a portion of its cash on hand.

The refinancing is expected to be leverage neutral, excluding fees and expenses, and the revolver is anticipated to be undrawn at close, the agency said.

The upgrade reflects KAR's meaningful debt reduction, margin expansion, very good liquidity profile and the recession-resistant nature of the company's combined revenue streams, the agency said.

The upgrade in the liquidity rating reflects KAR's very good liquidity profile, characterized by strong cash flow generation, significant revolver availability and an improved debt maturity schedule, the agency added.

The stable outlook reflects the expectation that KAR will continue to reduce financial leverage through modest revenue and earnings growth, Moody's said.

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