Moody's rates Ozburn-Hessey loans Ba3, B3

Moody's Investors Service said it assigned a Ba3 (LGD2, 20%) rating to Ozburn-Hessey Holding Co., LLC's planned $310 million first-lien credit facility, which includes a $35 million revolving credit facility due 2014 and a $275 million term loan due 2015, and a B3 (LGD4, 55%) rating to its planned $75 million second-lien term loan due 2016.

The B3 corporate family and probability-of-default ratings were affirmed, as was the B1 (LGD2, 24%) rating assigned to the company's $25 million senior secured revolver due 2012 and $227 million senior secured term loan due 2012.

The outlook was changed to stable from negative.

The proceeds of the new facilities will primarily be used to refinance the company's existing bank debt and the $100 million bank debt of affiliate OH Logistics International Holdings, Inc. Following the transaction, Ozburn-Hessey would own 100% of the affiliate, versus its current minority ownership level.

The agency said the outlook was changed due to expected liquidity profile and operating performance improvement - under the existing credit facility, the potential for a financial ratio covenant breach remains elevated based on scheduled step-downs, but step-downs would not occur under the planned first-lien facility until the second quarter of 2011.

The B3 corporate family rating reflects a view that robust, sustained free cash flow for debt reduction is not expected, Moody's said.

At the same time, the affirmation acknowledges Ozburn-Hessey's purchased, versus owned, transportation business model, the agency added.

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