Moody’s cuts Quality Distribution loan

Moody's Investors Service said it changed the outlook for Gruden Acquisition, Inc. (Quality Distribution) to stable from negative.

Moody's also affirmed the company's B3 corporate family rating, B3-PD probability of default rating, and the Caa2 rating for the company's second-lien term loan due 2023.

The company's senior secured first-lien term loan due 2022 was downgraded to B3 from B2.

“The change in outlook to stable from negative reflects Quality Distribution's improved credit metrics and positive free cash flow generation during the 12 months ended March 31, 2019,” Moody's lead analyst Andrew MacDonald said in a news release.

“While we believe leverage will remain elevated due to an acquisitive growth strategy that relies on incremental debt, the company should generate sufficient earnings and revenue growth to support debt levels and reduce leverage long term.”

The agency said the downgrade of the company's first-lien term loan was due to Moody's expectation that ongoing reliance on asset-based borrowings combined with the company's repeated usage of incremental first-lien term debt over the past several years weakens the recovery prospects of the term loan.

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