Moody's rates Butler loans B2, Caa1

Moody's Investors Service said it assigned a B2 senior implied rating to Butler Animal Health Holding Co. LLC. Moody's also assigned a B2 rating to the company's $30 million five-year senior secured first-lien revolving credit facility and $140 million six-year senior secured first-lien term loan B facility and a Caa1 rating to the $30 million seven-year second-lien term loan.

The outlook is stable.

Oak Hill Capital Management and Darby Group Cos., the current owner of Burns Veterinary Supply Inc., announced an agreement to acquire W.A. Butler Co. LLC. Oak Hill and Darby will each own about 50% of the combined entity, Butler Animal Health Holding Co. Management will also be investors alongside Oak Hill and Darby.

Moody's said the ratings reflect Butler's high leverage; Moody's expectation that free cash flow available for debt reduction will remain limited in the near term; integration risks related to the acquisition of Butler; vendor concentration; the highly competitive environment the company operates in; and consolidation pressures that may trigger debt-financed acquisitions.

The ratings also reflect Butler's leading position in the growing U.S. market for distribution of companion animal healthcare products; sound economics of the business model; broad customer diversification; Moody's expectation of synergy driven earnings and cash flow growth in the near to medium term; the solid performance track record at both predecessor companies; adequate liquidity; and management's significant experience in animal health care product distribution.

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