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Moody's rates Aramark notes B3, loan Ba3
Moody's Investors Service said it assigned a B3(LGD 6, 95%) to the $600 million of proposed senior notes of Aramark Holdings Corp. and a Ba3 (LGD 3, 30%) to the proposed amended revolving credit facility of Aramark Corp.
Aramark Holdings is the holding company parent of Aramark.
Aramark's B1 corporate family rating, B1 probability of default rating and SGL-2 speculative grade liquidity rating were affirmed and transferred to Aramark Holdings, the borrower under the proposed senior notes.
The outlook is stable.
The proceeds will be used from the $600 million note offering and about $133 million of borrowings under an amended revolver to fund a $712 million dividend to shareholders and pay related fees and expenses, Moody's said.
Aramark's $165 million (down from $600 million) senior secured revolver due 2013 was affirmed at Ba3 (with LGD 3, 30% from LGD 3, 34%); $200 million senior secured letter of credit facility due 2014/2016 at Ba3 (with LGD 3, 30% from LGD 3, 34%); $1.9 billion senior secured term loan due 2014 at Ba3 (with LGD 3, 30% from LGD 3, 34%); $1.4 billion senior secured term loan due 2016 at Ba3 (with LGD 3, 30% from LGD 3, 34%); $1.3 billion senior unsecured 8½% notes due 2015 at B3 (with LGD 5, 78% from LGD 5, 84%); $500 million senior unsecured floating-rate notes due 2015 at B3 (with LGD 5, 78% from LGD 5, 84%) and $250 million senior unsecured 5% notes due 2012 at B3 (with LGD 6, 92% from LGD 6, 96%).
The proposed financing and dividend will increase its pro forma debt-to-EBITDA ratio to 6.5x as of December 2010, a leverage level that is high for a B1-rated service company, Moody's said.
The affirmations reflect an expectation that Aramark will reduce its debt-to-EBITDA to the mid-5x range over the next 12 to 18 months, the agency said.
The ratings remain constrained by high financial leverage and modest free cash flow-to-debt, Moody's said.
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