Moody’s: KinderCare unchanged by loan add-on

Moody's Investors Service said that Kuehg Corp.'s (KinderCare Education) $205 million term loan add-on to fund the acquisition of Rainbow Child Care Center is credit negative given the adverse impact on leverage.

However, it does not impact the company's B3 corporate family rating or its stable outlook, the agency said.

Moody’s said that pro forma for the transaction for the 12 months ended June 30, the agency’s adjusted debt to EBITDA will increase to 6x from 5.6x, a level that remains below Moody's downward rating factor.

Barring any additional borrowings, the agency said it expects leverage will decline to 5.5x over the next 12 to 18 months driven by earnings growth.

However, given its private equity ownership and the aggressive financial policies as evidenced by this debt funded acquisition and the $300 million debt financed dividend in August 2017, Moody’s expects leverage will remain above 5.5x over the next 12 to 18 months, the agency said.

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