Moody’s rates Wastequip, facilities

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to HPCC Merger Sub, Inc. (Wastequip Inc.).

Concurrently, the agency assigned B1 ratings to the company's proposed $50 million senior secured first-lien revolver and $245 million senior secured first-lien term loan, and a Caa1 rating to the proposed $100 million senior secured second-lien term loan.

The outlook is stable.

HPCC Merger Sub is a new legal entity that was established as part of a transaction where affiliates of H.I.G. Capital are acquiring Patriot Container Corp., the indirect parent of Wastequip, LLC (B2 stable). HPCC Merger Sub will be the initial borrower under the credit facilities, and will merge with Patriot Container following the buyout, with the latter being the surviving entity.

Pro-forma for the proposed transaction, the company's debt-to-EBITDA and EBITA-to-interest for the 12 months ended Dec. 31, 2017 estimated about 6 times and 1.7 times, respectively. The agency expects leverage to approach the mid- to high-5 times range over the next 12-18 months.

"The incremental cash interest burden from nearly doubling Wastequip's total debt combined with minimal starting cash balances weakens liquidity," Andrew MacDonald, Moody's lead analyst for the company, said in a news release.

"But we believe the company's cash flows can cover the higher interest expense sufficiently to allow for cash to gradually build up and allow for debt repayment that along with earnings growth will drive deleveraging longer-term."

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