Moody’s: Gardner Denver loan Ba2, view to positive

Moody’s Investors Service said it assigned a Ba2 rating to Gardner Denver, Inc.’s new $1.9 billion term loan that will be issued under the name Ingersoll-Rand Services Co. as well as the company’s proposed amended and extended term loans. Moody’s also affirmed the Ba2 ratings for the company’s revolver and senior secured bank debt. The company’s speculative grade liquidity rating remains SGL-1. In addition, Moody’s changed the outlook to positive from stable.

The assigned Ba2 term loan ratings, in line with the company’s Ba2 rating, reflect that the first-lien bank debt comprises the preponderance of the company’s debt capitalization. The term loans benefit from upstream guarantees from substantially all of the company’s U.S. subsidiaries and a pledge of 66% of the stock of non-U.S. subsidiaries.

“Given the substantial equity consideration in the proposed transaction and EBITDA contribution from Ingersoll-Rand’s industrial business, the transaction is essentially leverage neutral on a pro-forma basis and we believe that Gardner Denver’s credit profile can withstand a moderating top-line growth environment given its strong free cash flow generating capability,” said Gigi Adamo, a Moody’s vice president, in a press release.

The outlook change reflects Moody’s view the pending combination with Ingersoll-Rand’s industrial business will result in a stronger business profile with an enhanced competitive position in the company’s industrial and energy end-markets. Moody’s said it expects a corresponding strengthening of the company’s financial risk profile over time, as evidenced by ensuing improvement in key financial metrics, with leverage (Moody’s-adjusted debt-to-EBITDA) remaining below 3x and EBITDA margins improving from the initially dilutive 20% range post-closing of the transaction. The positive outlook presumes the companies will be seamlessly integrated and that targeted synergies will be realized.

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