Moody's rates First Student Bidco Ba3

Moody's Investors Service said it assigned a Ba3 corporate family rating, a Ba3-PD probability of default rating and a Ba3 senior secured rating to First Student Bidco Inc., which is a co-borrower with First Transit Parent Inc. Both are held under common control.

“The rating action considers the company's significant market positions in the outsourced student transportation and transit service markets in North America, and the relative stability of these end-markets. Governance was a consideration in the rating action, as First Student will now be owned by a private equity company and is likely to operate with high financial leverage,” Moody’s said in a press release.

First Student is launching a $1.49 billion term loan B, $800 of million senior secured notes and a $500 million revolver, which, together with about $1.5 billion in equity from EQT Infrastructure, will fund the acquisition of First Student and First Transit from FirstGroup plc. The company is also launching a $525 million term loan C, whose funds will be placed in restricted accounts to collateralize letters of credit for insurance liabilities.

The outlook is stable. The outlook reflects an expectation the school transportation end market will approach pre-pandemic levels towards the back half of calendar year 2021, with the transit end market slightly below that, Moody’s said.

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