S&P turns Ken Garff view to positive

S&P said it revised its outlook for Ken Garff Automotive LLC to positive from stable and affirmed the BB- ratings on the company and its senior unsecured debt. The 4 recovery rating on the debt was also affirmed.

“The positive outlook reflects Ken Garff's improved scale and strong credit metrics, along with our expectation the company will maintain margins closer to peers and better than company margins prior to the pandemic. Since 2018 when we initially rated Ken Garff, the company's revenues have increased by almost 50% to over $6 billion in 2022 revenues while its EBITDA base has also grown significantly. The company generated adjusted EBITDA margins of around 6%-6.5% in 2022, though we expect margins to normalize around 3.5%, which is still 50-100 basis points higher than the margins the company generated pre-pandemic,” S&P said in a press release.

The agency noted there is the possibility of an upgrade if Ken Garff keeps increasing its scale while maintaining EBITDA margins above 3.5% even as the vehicle market normalizes and keeps maintaining a conservative leverage profile.

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