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Moody’s rates Karman Buyer loans B1, Caa1
Moody’s Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Karman Buyer Corp., the new parent of Advantage Sales & Marketing Inc.
The agency also said it assigned B1 (LGD 3) ratings to $200 million five-year senior secured first-lien revolver and $1.8 billion seven-year senior secured first-lien term loan.
Moody’s also said it assigned a Caa1 (LGD 5) rating to $760 million eight-year senior secured second-lien term loan.
The proceeds will be used in conjunction with the acquisition of majority control of Advantage Sales & Marketing by private equity groups Leonard Green & Partners, LP and CVC Capital Partners from Apax Partners, and to refinance existing debt.
The outlook is negative.
Karman is proposing to raise a $2 billion first-lien bank facility, consisting of a $200 million five-year revolver and a $1.8 billion seven-year term loan, along with a $760 million second-lien eight-year term loan.
The first-lien and second-lien term loans and $1.7 billion in equity will be used to purchase ASM equity, refinance about $1.4 billion of existing debt and pay fees and expenses.
Following the close of the transaction, through a series of downstream mergers, the borrower is expected to be Advantage Sales & Marketing Inc., Moody’s said.
The ratings reflect the company’s high pro forma leverage of more than 8x, along with its customer concentration, ongoing acquisition risk and the potential for dividends given ownership by private equity.
Despite this high leverage, Moody’s said it expects the company will increase its earnings via organic growth and acquisitions.
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