Moody's upgrades Trader

Moody's Investors Service said it upgraded Trader Corp.'s corporate family rating to B2 from B3, probability of default rating to B2-PD from B3-PD, C$30 million senior secured credit facility to Ba2 (LGD1) from Ba3 (LGD1), $290 million senior secured notes to B1 (LGD3) from B3 (LGD3) and speculative grade liquidity rating to SGL-2 from SGL-3. The outlook was changed to stable from positive.

The upgrade reflects “Trader's demonstrated improvement in operating performance and expectations that the company's credit metrics will continue to improve through the next 12 to 18 months," Peter Adu, a Moody's analyst, said in an agency news release. "The two-notch upgrade of the secured notes rating reflects the loss-absorption capacity provided by the $110 million subordinated shareholder loans, which we now treat as 100% debt."

Trader's B2 corporate family rating primarily reflects Moody's expectation of mid-4x leverage (adjusted debt/EBITDA) through the next 12 to 18 months (was 5.3x for the last 12 months ended in June), the company's very small size and narrow focus, risk of new entrants and competitive pressures, offset by the company's successful transition to digital from print, strong position in the Canadian used automobile advertising market and demonstrated ability to deleverage.

The outlook is stable to reflect Moody's expectation that the company will improve its credit metrics further to compensate for its scale/diversity limitations and thereby firmly position itself in the B2 rating.

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