Moody's rates AT Holdings notes Caa1

Moody's Investors Service said it assigned a Caa1 rating to AT Holdings Corp.'s proposed $50 million senior discount notes due 2012 and has assigned AT Holdings a corporate family rating of B2.

The purpose of these notes is to partially fund the acquisition of AT Holdings, the parent company of Argo-Tech Corp., by V.G.A.T. Investors LLC for total consideration of about $176 million. The balance of the purchase price will be funded by about $120 million in equity contribution by V.G.A.T., and, to a much smaller degree, by an increase in Argo-Tech's existing term loan facility as well as through use of internal cash.

In related actions, Moody's said it has confirmed the B1 ratings on Argo-Tech's existing senior secured credit facilities and assigned a B1 rating to add-on senior secured credit facilities, has confirmed the B3 rating on Argo-Tech's $250 million senior unsecured notes, and has withdrawn Argo-Tech's corporate family rating, which is now placed at AT Holdings.

The outlook is stable.

The stable outlook reflects Moody's expectations that Argo-Tech's sales base will grow moderately with stable operating margins over the next 12 to 18 months, with free cash flow returning to positive levels over that period, allowing for modest debt reduction in the near term. Ratings may be pressured if the company undertakes a large levered acquisition or if it experiences operating difficulties or reduced business activity in the commercial aviation sector.

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