Moody's rates Aearo loans B1, Caa1

Moody's Investors Service said it affirmed Aearo Technologies, Inc.'s B2 corporate family and probability-of-default ratings and assigned B1 (LGd3, 34%) rating to its new $60 million first-lien revolving credit facility due 2013 and $475 million first-lien term loan B due 2014 and a Caa1 (LGD5, 86%) rating to its new $200 million second-lien term loan due 2014.

The outlook is stable.

The $735 million of new credit facilities, together with cash on hand, will refinance the company's existing $570 million of bank debt and allow the redemption of preferred stock at the holding company level through the payment of a dividend to stockholders.

Despite higher leverage following the dividend recapitalization, the affirmation reflects Moody's recognition of the company's sound business profile characterized by leading market shares in several high-growth categories of the personnel protection equipment market and diversity with regards to end-user sectors, customers and to some extent geographies.

However, the agency cautioned that Aearo's leverage will return to a high level following the recapitalization deal with a pro forma debt-to-EBITDA ratio of 6.6 as of March 31. The cash return to shareholders one year after the Permira investment in the company demonstrates, in Moody's view, the company's aggressive financial policy in the context of its ownership by a private equity firm.

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