Moody’s rates SMB Shipping facilities

Moody's Investors Service said it affirmed SMB Shipping Logistics, LLC’s B3 corporate family rating and B3-PD probability of default rating and assigned B1 ratings to the new $70 million first-lien senior secured revolver and $500 million first-lien senior secured term loan.

The agency also assigned a Caa2 rating to the new $200 million second-lien senior secured term loan.

The outlook is stable.

Proceeds will be used to refinance outstanding debt, acquire an existing franchise, and to pay a $130 million dividend to shareholders.

The ratings on existing debt are not affected and will be withdrawn upon close.

Moody's said it views the proposed $130 million dividend as aggressive and as representing a high tolerance for financial risk.

“Pro forma for the transaction, Moody's anticipates Debt-to-EBITDA of about 6.8x. This represents more than 1x in incremental leverage and is well beyond the closing leverage of 6x when the ratings were initially assigned in January 2017,” the agency said in a news release.

“These considerations are tempered by Moody's expectations that SMB's good growth prospects will lead to a reduction in leverage and continued free cash flow generation over the next 12 to 18 months.

“In the meantime, additional transactions of a leveraging nature or an inability to reduce leverage down to more sustainable levels could create downward rating pressure.”

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