Moody's rates API Holdings loans B2

Moody's Investors Service said it assigned first-time ratings to API Holdings III Corp., including a B3 corporate family rating, B3-PD probability of default rating and B2 (LGD 3) ratings on its guaranteed senior secured first-lien revolving credit facility and guaranteed senior secured first-lien term loan.

The proceeds from the rated term loan, along with a $90 million second-lien term loan, will help fund the purchase of API Technologies Corp. by AEA Investors LP.

The outlook is stable.

The ratings balance the company's small size and high initial financial leverage with significant incremental borrowing capacity against a supportive U.S. defense setting, recent margin gains that should continue and an adequate liquidity profile that provides some financial flexibility, Moody's said.

Following the acquisition financing, API's funded debt balance will rise to about $350 million, a significant increase since 2017, the agency said.

While the company's operational restructuring activities and price actions have materially improved gross margin, the higher debt load will well exceed the debt levels that API has shouldered in recent years, Moody's said.

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