Moody's cuts Brake Bros. to B2

Moody's Investors Service said it downgraded Brake Bros. Finance plc's corporate family rating to B2 and affirmed the company's B3 £105 million senior notes due 2011 and B3 €105 million senior notes due 2011. The outlook is stable.

The downgrade follows the proposed issuance of £275 million pay-in-kind notes at parent entity Brake Bros. Holding III Ltd. Proceeds from the proposed notes will be mainly used to fund a £249 million cash distribution to Brakes' shareholders, to pay down the company's pension deficit by £16 million and to cover transaction fees and other costs of £10 million.

The agency said the downgrade of Brakes' corporate family rating reflects mainly the weakening in credit metrics following the pay-in-kind notes issuance, with adjusted debt to EBITDA rising to 6.3 times from 4.2 times at June 30. The proposed transaction also signals a more aggressive financial strategy.

The affirmation of the existing notes reflects the limited effects that the proposed pay-in-kind notes are expected to have on the notes under the existing indenture and the fact that the claim of the new notes on Brakes is solely by virtue of Brake Bros. Holding III equity holding, Moody's said.

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