Moody's rates On Assignment loans Ba2

Moody's Investors Service said it assigned Ba2 (LGD3) ratings to On Assignment, Inc.'s proposed $975 million of senior secured credit facilities and affirmed its Ba2 corporate family rating, Ba3-PD probability of default rating and SGL-2 speculative grade liquidity rating. The outlook is stable.

The proceeds of the $875 million term loan B will be used to refinance existing debt and to complete the acquisition of Creative Circle for $600 million, including up to $30 million of contingent consideration. Pro forma for the acquisition, On Assignment's ratio of total debt to EBITDA will increase to 3.7 times from 2.3 times.

The agency said that although it expects leverage to remain at the higher end of the tolerance range for the Ba2 corporate family rating over the next 12 months, it affirmed On Assignment's Ba2 rating to reflect the company's commitment to reduce leverage from a combination of EBITDA growth and accelerated debt repayment and the company's track record of deleveraging after the Apex acquisition in 2012. Moody's expects On Assignment's leverage ratio to decline to about 3 times by the end of 2016.

In Moody’s view, the Ba2 corporate family rating is supported by On Assignment's solid prospective free cash flow relative to debt (17% to 18% in 2016).

However, like its competitors, On Assignment is vulnerable to cyclical macroeconomic changes such as rising unemployment levels and volatility in capital spending, the agency added.

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