Moody's rates Reddy Ice loan B1

Moody's Investors Service said it assigned a B1 rating to Reddy Ice Group Inc.'s proposed secured credit facility and affirmed existing ratings at both Reddy Ice and Reddy Ice Holdings Inc. The outlook is stable.

Moody's affirmed Reddy Ice's B3 rated $150 million senior subordinated notes due 2011, Caa1 rated $100 million 10½% senior discount notes due 2012, B1 senior implied rating and Caa1 senior unsecured issuer rating.

Proceeds from the proposed amended and restated facility, which is intended to replace the existing secured credit facility also rated B1, are expected to repay outstanding bank debt and to contribute to the retirement of Reddy Ice's existing 8 7/8% senior subordinated notes due 2011.

In February, the company filed a Form S-1 registration statement regarding its intention to do an initial public offering of its common stock and combine the anticipated proceeds with that of the proposed credit facility to finance the tender of the 2011 notes and to pay related fees and expenses.

Moody's said it anticipates that there is likely to be a very high dividend payout built into the proposed going public transaction, and there should be sufficient bandwidth within the rating categories to accommodate that expectation.

The ratings reflect Reddy Ice's steady performance driven by solid and improving volume and price per pound metrics, relatively low capital expenditures and working capital requirements, no mandatory term amortization on the proposed term loan and high financial leverage, according to Moody's.

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