S&P rates Adesa notes B+

Standard & Poor's said it assigned its B+ rating to Adesa Inc.'s proposed $125 million senior subordinated notes due 2012 and affirmed its BB corporate credit and senior secured ratings on the company.

The outlook is stable.

Proceeds from the new debt issue, combined with a planned $150 million initial public offering and a new bank credit facility, will be used to refinance existing debt and to pay a $100 million dividend to the company's parent, Allete Inc. (BBB+/stable/A-2). Within a few months of the IPO, Allete intends to spin off its remaining interest in Adesa to Allete shareholders.

S&P said the ratings reflect Adesa's slightly below-average business profile, characterized by a competitive operating environment, its risky financing operations, its large customers with considerable leverage, and somewhat variable demand.

These challenges more than offset Adesa's solid No. 2 market position, growing market share with key accounts, and good geographic scope. The ratings also incorporate Adesa's historically aggressive financial policy and its below-average cash flow protection.

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