Moody's rates AAG FH notes B3

Moody's Investors Service said it assigned a corporate family rating of B2 to AAG FH LP, along with a B2-PD probability of default rating.

The agency also said it assigned a B3 (LGD 5) rating on its proposed senior unsecured notes with AAG FH FinCo Inc. as a co-issuer.

The outlook is stable.

AAG is in the debt market to raise new $225 million senior unsecured notes due in 2024.

The proceeds will be used to repay outstanding borrowings under its existing bank facilities, refinance existing preferred equity interests and to buy out minority investors, Moody's said.

The ratings are constrained by an expectation that leverage will be sustained at about 6x in the next 12 to 18 months as free cash flow may be used for acquisitions, the agency said.

The ratings also consider the execution risks around its car dealership acquisition growth strategy and small revenue size relative to rated U.S. auto retailing peers, Moody's said.

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