S&P rates Capital Auto loan BB+, notes BB-

Standard & Poor's said it assigned preliminary ratings of BB+ with a recovery rating of 3 to Capital Automotive LP's proposed $1.67 billion secured credit facility and BB- to Capital Automotive REIT's proposed $500 million senior unsecured notes.

At the same time, the ratings on Capital Automotive REIT and Capital Automotive LP - including the BBB- corporate credit and senior unsecured debt ratings and BB+ preferred stock rating - remain on CreditWatch with negative implications, where they were placed on Sept. 7 following the company's announcement that it had agreed to be acquired by Flag Fund V LLC.

Proceeds of the proposed debt instruments will help fund the $3.4 billion acquisition of the company and repay all existing rated senior unsecured debt securities.

The negative watch reflects the more aggressive financial profile that will result if the acquisition closes as proposed, the agency said. The company's pro forma capital structure will be more highly leveraged and secured with weak debt protection measures.

However, the weaker financial profile is offset by the stable nature of the portfolio and the expected continuity of management and the current business strategy, the agency said.

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