Moody's rates KAR notes B3, Caa1

Moody's Investors Service said it assigned provisional B3 (LGD5, 72%) ratings to KAR Holdings, Inc.'s proposed $600 million senior unsecured notes due 2014, which consist of a mix of floating- and fixed-rate notes, and a provisional Caa1 (LGD6, 91%) rating to its proposed $500 senior subordinated notes due 2015.

The agency also affirmed the provisional B2 corporate family and probability-of-default ratings assigned to the company and the provisional Ba3 (LGD2, 26%) ratings assigned to its proposed $300 million senior secured revolving credit facility due 2013 and proposed $1.490 billion senior secured term loan due 2013.

The outlook is stable.

The notes are being issued in conjunction with the acquisition of Adesa, Inc. by a group of private equity funds. Insurance Auto Auctions, Inc. will be combined with Adesa upon closing. The proceeds from the note issuance, along with $1.49 billion of senior secured term debt and $790 million of new cash equity, will be used to finance the acquisition of Adesa's equity, repay existing debt at Adesa and Insurance Auto and pay fees and expenses associated with the transaction.

The agency said the provisional B2 corporate family rating primarily reflects very high financial leverage upon completion of the transaction and slightly negative pro forma free cash flow in 2006 for the combined entity.

The ratings are supported by high barriers to entry, the size and national scale of the combined Adesa/Insurance Auto organization, recession-resistant revenue streams, favorable growth prospects across all business lines and low inventory risk, Moody's added.

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