Moody’s rates Keter loans B1, Caa2

Moody’s Investors Service said it assigned a B1 rating to Keter Group BV’s new €50 million super senior secured bank credit facility due December 2024 and a Caa2 rating to the company's €1.2 billion senior secured term loan B, split into two tranches, due March 2025 and on the €102 million senior secured term loan B4 due December 2024.

The agency also changed Keter’s outlook to stable from negative and upgraded the probability of default rating to Caa2-PD/LD from Caa3-PD/LD and affirmed its Caa2 corporate family rating.

The affirmation of the CFR and the upgrade of the PDR reflects Keter's improved liquidity position following the closing of the amend and extend (A&E) transaction on Sept. 21, 2023. The company extended the maturities of its €1.2 billion and €102 million TLB tranches to March 2025 and December 2024, respectively.

Keter concurrently obtained a €50 million super senior secured bank credit facility due December 2024. The new facilities carry a higher interest rate, but the incremental component will not be paid in cash and the related portion of interest costs will be capitalized, the agency noted. The company also replaced the springing first-lien leverage test included in its revolving credit facility with a new minimum liquidity test.

“Furthermore, Keter's parent company will start an M&A process aimed at the sale of the company, with proceeds to be used to repay the outstanding senior debt. The sale process will be monitored by an independent M&A committee with closing expected before mid-2024. The amend and extend transaction constitutes a distressed debt exchange, i.e. an event of default under Moody's definition, given it entails both default avoidance and loss for creditors. At the same time, however, the transaction resolves Keter's near-term refinancing risk because the maturities of the TLBs are now extended by 17 months, thereby improving the company's liquidity position in 2023 and 2024,” the agency said in a press release.

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