Moody's rates Harbor loans Ba3

Moody's Investors Service said it assigned Ba3 corporate family and probability-of-default ratings to Harbor Freight Tools USA, Inc. and Ba3 (LGD4, 50%) ratings to the company's proposed $750 million senior secured term loan due 2017 and $25 million secured revolving credit facility due 2015.

The outlook is stable.

Proceeds from the new term loan will be used to refinance $479 million of existing debt and, together with excess cash held by the company, to fund a dividend to shareholders.

The agency said the Ba3 corporate family rating reflects the company's high operating margins, generally consistent positive sales growth and moderate financial leverage. The pro forma debt-to-EBITDA ratio is expected to be in the mid 3 times range.

Key credit concerns include the company's relatively small size relative to larger, better-capitalized home improvement retailers and its long term track record of paying debt-financed dividends to its shareholders, Moody's said.

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