Moody's rates STS Operating loan B2

Moody's Investors Service said it assigned a B2 rating to STS Operating, Inc.'s (SunSource) proposed senior secured term loan due 2024.

The agency also said it affirmed the company's B2 corporate family rating and B2-PD probability of default rating.

The outlook is stable.

The proceeds of the new debt, along with equity from new sponsor Clayton Dubilier & Rice, LLC, will be used primarily to fund the acquisition of STS, including refinancing its existing debt.

SunSource also will issue a $50 million ABL revolving credit facility that is expected to be undrawn upon transaction close, Moody's said.

The new facilities will be co-borrowed by CD&R Hydra Buyer, Inc.

The ratings on the company's existing senior secured bank credit facility, consisting a $25 million revolver due 2019 and a $255 million term loan due 2021 are unchanged at this time and will be withdrawn upon transaction close, the agency said.

The ratings reflect the company's modest scale, revenue exposure to highly cyclical industrial end markets, regional concentration and a financial policy that is likely to maintain its financial leverage at about 5x, Moody's said.

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