Moody’s assigns S&S B3

Moody’s Investors Service said it assigned first-time ratings to S&S Holdings, LLC, including a B3 corporate family rating and a B3-PD probability of default rating. Also, Moody’s gave a B2 rating to S&S’ proposed $600 million first-lien term loan and a Caa1 rating on the proposed $200 million second-lien term loan.

“The B3 CFR assignment incorporates governance considerations given the company’s private equity ownership and high pro forma leverage post-acquisition with debt/EBITDA greater than 7x for the LTM period ending Nov. 30, 2020. Private equity owners tend to have aggressive financial strategies favoring high leverage with a higher potential for dividend recapitalizations and the pursuit of debt-financed acquisitions. The rating also reflects the competitive nature of the apparel distribution industry, which is also exposed to macroeconomic cycles and Moody’s view of high supplier concentration,” the agency said in a press release.

The proceeds will be used to complete the acquisition of S&S by Clayton, Dubilier & Rice

The outlook is stable. “The stable outlook reflects the expectation of adequate liquidity and that S&S will deleverage through earnings growth as it benefits from sales growth and enhanced margins,” Moody’s said.

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