Moody's rates Oshkosh loans Ba3, cuts JLG note to B2

Moody's Investors Service said it assigned Ba3 corporate family and probability-of-default ratings and an SGL-2 speculative grade liquidity rating to Oshkosh Truck Corp. and a Ba3 rating with a loss-given-default assessment of LGD3 (47%) to the company's proposed $3.5 billion first-lien senior secured credit facility, which includes $500 million revolving credit facility, $400 million term loan A and $2.6 billion term loan B.

The outlook is stable.

The proceeds of the proposed credit facility will fund Oshkosh's acquisition of JLG Industries, Inc. for $3.2 billion, net of cash and including closing costs.

In a related action, Moody's affirmed the B2 rating (LGD6, 97%) assigned to JLG's $89.5 million subordinated notes and lowered to B2 (LGD6, 96%) from Ba3 the rating for its $113.8 million unsecured notes. As part of the acquisition, JLG has begun a tender offer and consent solicitation for these note issues. Under the terms of this offer, any untendered notes will be stripped of protective covenants.

While recognizing the financial strength of Oshkosh before the acquisition, Moody's said the Ba3 corporate family rating reflects the reduction in credit metrics that will result from its acquisition of JLG, which will increase balance sheet debt to more than $3.1 billion and the debt-to-EBITDA ratio to about 4.6x. Oshkosh must also contend with the ongoing cyclicality of the non-residential construction sector, JLG's primary end market, and integrating a significant acquisition.

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