Moody’s rates Osmose Utilities loans B2, Caa2

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., a B2 rating to its proposed first-lien senior secured credit facilities consisting of $275 million term loan due 2022 and $45 million revolving credit facility expiring 2020 and a Caa2 rating to the proposed $115 million second-lien term loan due 2023.

The outlook is stable.

Osmose entered into a definitive agreement whereby Kohlberg & Co. will acquire the company from its current owners Oaktree Capital Management, LP. The transaction will be financed with the term loan proceeds and an equity contribution from the sponsor.

Moody’s said the transaction increases the company's debt significantly (by about $150 million) to $390 million, which results in a total debt level in excess of revenues and pro forma debt-to-EBITDA leverage rising to roughly 7.3 times (incorporating the beneficial impact of recently renegotiated contracts). Osmose’s highly leveraged balance sheet represents a credit profile consistent with the B3 rating category. Pro forma EBITDA less capex to interest coverage is estimated at 1.6 times.

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