Moody’s rates Safe Fleet, facilities

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to Swordfish Merger Sub, LLC.

Concurrently, the agency assigned B2 ratings to the proposed $50 million senior secured first-lien revolver and $410 million senior secured first-lien term loan, and a Caa2 rating to the proposed $190 million senior secured second-lien term loan.

The outlook is stable.

Swordfish Merger Sub is a new legal entity that was established as part of the transaction whereby affiliates of Oak Hill Capital are purchasing the company. Following consummation of the buyout, Swordfish Merger Sub will merge with Safe Fleet Holdings LLC, with the latter being the surviving entity. The transaction is expected to close at the end of January.

Pro-forma for the proposed transaction and recent acquisitions, the company's debt-to-EBITDA and EBITA-to-interest for the 12 months ended Sept. 30, 2017 estimated 7.3 times and 1.9 times, respectively (all ratios are Moody's adjusted unless otherwise stated). The agency expects leverage to improve to the 6.5 to 7 times range over the next 12 to 18 months.

"Safe Fleet's highly levered capital structure weighs heavily on the B3 corporate family rating," Andrew MacDonald, Moody's lead analyst for the company, said in a news release.

"However, steady demand for the company's products at solid margins will ultimately result in good cash flows and earnings growth, which in turn will drive de-leveraging absent future debt-funded acquisitions and shareholder dividends."

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