Fitch rates First Student, First Transit BB-

Fitch Ratings said it assigned first-time long-term expected issuer default ratings of BB- to Recess Holdco Inc., First Student Bidco Inc. and First Transit Parent Inc., the newly created entities acquiring First Student and First Transit from FirstGroup plc. Fitch also gave expected BB+/RR1 ratings to the company's planned senior secured term loan B, revolving credit facility, senior secured notes and term loan C. First Student Bidco and First Transit Parent are co-borrowers.

“The ratings are limited by the company's expected elevated leverage profile following its purchase by EQT Infrastructure (EQT), and by the impact of the coronavirus pandemic on its performance over the past year. First Transit's thin margin profile, seasonality in the First Student business and tight labor market also contribute to the BB- rating. Concerns around leverage following the purchase by EQT are offset by positive rating factors including First Student's number one market position, solid liquidity and the company's stable contracted customer base,” Fitch said in a press release.

The agency noted, “First Student is the largest provider of outsourced student transportation in North America with a company-estimated 21% market share, nearly twice the size of the next largest competitor.”

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