Moody's assigns Osmose B3

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to Osmose Utilities Services, Inc.

Concurrently, Moody's assigned a B2 rating to the proposed first-lien senior secured credit facilities consisting of a $760 million term loan due 2028 and a $100 million revolving credit facility expiring 2026.

“Osmose's B3 CFR reflects its elevated debt-to-EBITDA leverage of 7.4 times (Moody's adjusted) for the 12 months ending March 31, 2021, pro forma for the return of capital recapitalization and Moody's expectation for leverage to decline to the mid-to-high six times range in the next 12 to 18 months. The planned return of capital and the company's history of debt-funded acquisitions supports Moody's expectation that the company will maintain an aggressive financial policy that may delay deleveraging in favor of acquisitions or shareholder returns,” the agency said in a press release.

The first lien rating is a notch above the B3 CFR, reflecting the first-priority lien on substantially all Osmose's assets and the loss absorption provided by the second-lien loan due 2029 in Moody's hierarchy of claims at default, the agency said.

Term loan proceeds, proceeds from an unrated $270 million second-lien term loan and $45 million of balance sheet cash, will be used to fully repay the company's $703 million first-lien term loan, fund a $354 million return of capital to shareholders and pay related fees and expenses. The new $100 million revolver is expected to remain undrawn at closing.

The outlook is stable.

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