Moody's rates Safway notes B3

Moody's Investors Service said it re-established coverage and assigned a B3 corporate family rating and B3-PD probability of default rating to Safway Group Holding LLC and a B3 (LGD4, 52%) rating to its proposed $540 million of senior secured second-lien notes due 2018. The outlook is stable.

Proceeds from the notes will be used to refinance existing debt and to distribute a dividend to the equity owners. Odyssey Investment Partners, through its respective affiliates, owns Safway.

The agency said Safway's B3 corporate family rating reflects the company's high adjusted debt leverage metrics driven by a sizeable debt-financed dividend. Safway did not generate any reported GAAP free cash flow in 2012, and according to Moody's projections, the adjusted debt-to-EBITDA ratio will remain elevated at close to 6.0 times for the next 12 to 18 months.

Moody's said that offsetting its concerns about the company's higher debt burden are expectations for margin expansion as conditions in the refining and power sectors, key drivers of Safway's revenues, improve.

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