Moody's rates Fairbanks Morse B3

Moody's Investors Service said it assigned initial ratings to Arcline FM Holdings, LLC (Fairbanks Morse Defense), including a B3 corporate family rating, a B3-PD probability of default rating, a B2 rating to the first-lien term loan and a Caa2 rating to the second-lien term loan.

“The B3 CFR reflects very high pro forma starting leverage. Moody's estimates 2020 debt/EBITDA pro forma for the pending transaction at 10x. That said, Moody's expects that leverage will quickly decline due to strong earnings growth. Despite earnings growth, debt/EBITDA will remain high –– in the high-7x by the end of 2021,” the agency said in a press release.

Proceeds will be used to refinance all of Fairbanks Morse Defense’s debt and pay a $227 million dividend to the company's sponsor.

The outlook is stable.

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