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Moody’s rates Airxcel loans B3, Caa2
Moody's Investors Service said it assigned AirX Holdings, Inc. (Airxcel Inc.) a B3 corporate family rating and a B3-PD probability of default rating.
Concurrently, the agency assigned a B3 rating to the company's proposed $360 million senior secured first-lien term loan and a Caa2 rating to its proposed $120 million senior secured second-lien term loan.
The sizeable portion of first-lien term debt and presence of a $60 million first-priority lien ABL (unrated) result in the term debt being rated at the same level as the corporate family rating; however, Moody's noted that even a modest shift in the eventual capital structure could result in a rating change for this debt.
The outlook is stable.
Net proceeds and about $182 million of equity will be used to fund the leveraged buyout of the company by L Catterton, and to repay existing debt and cover associated fees and expenses.
Following the buyout, the new debt issued by AirX Holdings, will be assumed by AXL Holdings, Inc., the indirect parent of Airxcel, Inc., and all former ratings for Airxcel, Inc. will be withdrawn concurrent with the associated repayment of its debt obligations. The transaction is expected to close in April 2018.
"Airxcel's new capital structure is marked by a significant increase in total debt, and subsequently weaker key credit metrics and free cash flows to levels that are more appropriately reflected in the lower B3 corporate family rating, particularly given the cyclical nature of the RV market," Andrew MacDonald, Moody's lead analyst for the company, said in a news release.
"Even so, we believe the company can cover the higher debt service burden and still build some cash that could be used for debt repayment, which combined with earnings growth should drive deleveraging of the balance sheet longer-term."
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