Moody's rates Stolle loans Ba3, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating to Stolle Machinery Co. LLC, a Ba3 rating to the company's $140 million first-priority senior secured credit facilities ($115 million term loan and $25 million revolver) and a Caa1 rating to its $60 million senior second-lien secured term loan. The ratings for the facilities reflect both the overall probability of default of the company, to which Moody's assigns a probability-of-default rating of B3, and a loss-given-default rating of LGD 2 for the first-lien secured facility and LGD 4 for the second-lien term loan.

The outlook is stable.

Stolle is being acquired by Littlejohn & Co., LLC. The purchase will be financed with approximately $175 million of funded debt as well as an equity contribution from Littlejohn and management.

The agency said Stolle's ratings reflects the speculative characteristics of its credit and are constrained by high pro forma debt leverage at closing, modest free cash flow generation, customer concentration risks and the potential challenges posed by variability in customers' capacity expansion spending.

The primary factors supporting the ratings are Stolle's strong and defensible leading global market, the predictability of its recurring spare parts/service and recapitalization revenue streams that combined represent approximately 68% of last-12-month June 2006 revenues and the near-term visibility afforded by the company's backlog and customers' announced can line expansions, Moody's said.

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