Moody's affirms KAR

Moody's Investors Service said it affirmed the B2 corporate family and probability-of-default ratings of KAR Holdings, Inc. and assigned a speculative grade liquidity rating of SGL-3.

KAR has Ba3 ratings (LGD2, 26%) for its $300 million senior secured revolving credit facility due 2013 and $1.565 billion senior secured term loan due 2013; B3 ratings (LGD5, 74%) for $150 million senior unsecured floating rate notes due 2014 and $450 million senior unsecured fixed rate notes due 2014; and Caa1 ratings (LGD6, 92%) for the $425 million senior subordinated notes due 2015.

The outlook is stable.

Moody's said the B2 corporate family rating reflects generally weak credit metrics, including the company's very high financial leverage and minimal free cash flow generation.

Ratings remain constrained by continuing integration risk, limited financial flexibility and the highly competitive nature of the industry, the agency said.

Ratings are supported by high barriers to entry, relatively recession-resistant revenue streams, growth prospects across most business lines and low inventory risk, Moody's said.

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