Moody’s cuts Sally notes, rates facility Ba1

Moody's Investors Service said it assigned a Ba1 rating to the proposed $850 million senior secured credit facility of Sally Holdings LLC and Sally Capital, Inc. as co-borrowers.

Concurrently, the agency downgraded the company's existing senior unsecured notes to Ba3 following a change in the company's capital structure, as per Moody's loss given default methodology.

At the same time, Moody's affirmed the Ba2 corporate family rating, Ba2-PD probability of default rating and the SGL-1 speculative grade liquidity rating.

The outlook is stable.

The proposed senior secured credit facility will consist of a $600 million floating-rate secured term loan and a $250 million fixed-rate secured term loan.

Proceeds, along with modest revolver borrowings, will be used to redeem the $850 million 5¾% senior unsecured notes due 2022.

While the proposed transaction is leverage neutral and extends Sally's debt maturity profile, Moody’s said the downgrade of the unsecured notes reflects the addition of a sizeable amount of secured debt ahead of it in the capital structure.

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