Moody’s cuts Capital Automotive; rates facilities B1, B3

Moody's Investors Service said it downgraded Capital Automotive LLC's corporate family rating to B2 from Ba3 as the proposed debt refinancing transaction will materially increase leverage and weaken fixed coverage.

Concurrently, the agency assigned B1 ratings to Capital Automotive LP's first-lien term loan and senior secured credit facility and a B3 rating to the second-lien term loan.

The outlook is stable.

Capital Automotive plans to raise $1,115,000,000 from a new first-lien term loan and $690 million from a new second-lien term loan facility.

The company expects to use the proceeds to repay the existing first- and second-lien term loans, $796 million and $425 million respectively, pay down the $120 million revolver balance, and to fund a dividend and transaction costs. The company is also replacing its $200 million secured revolver that matures in 2018 with a facility of equal size with a 2022 maturity and the new revolver will be undrawn at closing.

Moody’s said these transactions will result in significant deterioration to the company's currently weak leverage metrics and also significantly pressure fixed-charge coverage.

Positively, the refinancing will meaningfully extend Capital Automotive’s debt maturity schedule, the agency added.

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