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Moody’s lifts Hoover loan to B1
Moody's Investors Service said it upgraded the first-lien term loan of Hoover Group, Inc. to B1 from B3 following the merger with Ferguson Group and Catalyst & Chemical Containers and the addition of junior debt to the capital structure.
Concurrently, the agency assigned a B3 corporate family rating to Hoover Group, Inc. (New) (the to-be-determined reporting entity and parent of Hoover, Ferguson and Catalyst) and withdrew the B3 corporate family rating from Hoover.
Moody's also assigned a B3-PD probability of default rating to Hoover (New) and withdrew the Caa1-PD probability of default rating from Hoover. This upgrade reflects the change in the family recovery rate to 50% from 65% as the capital structure no longer consists solely of first lien debt (discussed below).
The outlook is stable.
The merger recently closed and Hoover (New) is 50/50 owned by Brambles Ltd. (Baa1 stable and the previous owner of Ferguson and Catalyst) and the shareholders of Hoover. The pro forma capital structure consists of a $30 million revolver and a $223 million first-lien term loan (includes a $60 million add-on) at Hoover and the new $150 million second-lien term loan (unrated) at HFG Finance Ltd., which is expected to be a subsidiary of Hoover (New).
The first-lien term loan was upsized by $60 million and proceeds were used to repay existing debt at Hoover, including borrowings under the revolver. The second-lien term loan is the assumed debt of Ferguson and Catalyst.
"The merger doubles the company's size and adds significant international operations, but also further increases the company's exposure to the significantly pressured oil and gas end markets," Moody's analyst Todd Robinson said in a news release.
"Moody's expects that earnings will continue to decline despite anticipated synergies from the merger and that leverage will be around 6 times over the next 12 to 18 months, which is appropriate for the B3 CFR."
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