Fitch assigns LKQ BBB-

Fitch Ratings said it assigned first time BBB- long-term issuer default rating to LKQ Corp. and its LKQ European Holdings BV subsidiary.

The agency also gave BBB- ratings to LKQ's $3.15 billion senior secured revolving credit facility, $350 million term loan and €750 million of senior unsecured notes issued by LKQ Europe and LKQ Italia Bondco SpA.

“LKQ's ratings reflect the company's leading market positions within the European automotive aftermarket and the collision repair market in North America. The ratings also reflect LKQ's ability to generate strong FCF through the pandemic, its large scale relative to competitors and stable operating performance. However, the company's relatively limited exposure to the larger ‘Do-It-for-Me’ (DIFM) market in North America, sensitivity to economic cycles through its specialty segment and its lack of exposure to developing markets are also incorporated into the ratings,” Fitch said in a press release.

The agency said it sees LKQ's FCF margin to moderate to about 6% in 2021, before running in the 5.5%-6.5% range over the next several years, as EBITDA rises and cash interest expense falls.

The outlook is stable, reflecting Fitch position that the worst effects of the pandemic are behind LKQ.

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