Moody’s applies Ba3 to KAR loans

Moody's Investors Service said it assigned a Ba3 rating to KAR Auction Services, Inc.'s proposed $300 million revolving credit facility and $1.35 billion of term loans, and affirmed the B1 corporate family rating, B1-PD probability of default rating and SGL-1 speculative grade liquidity rating.

The ratings have a stable outlook.

The company plans to use the proceeds from the new term loans to refinance its outstanding revolver borrowings and for general corporate purposes. The refinancing will also extend the company's debt maturities.

Moody's estimates that pro forma for the refinancing and the pending acquisition of Brasher's Auto Auctions, KAR's leverage will be about 5.6 times (Moody's adjusted). The affirmation of the B1 corporate family rating reflects the agency’s expectation that KAR's leverage will decline toward 5 times over the next 12 months from organic EBITDA growth of about 7% to 8% and EBITDA contribution from acquisitions. Moody's expects KAR to generate free cash flow of roughly $190 million in 2016 (about 4% of total adjusted debt).

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