Moody's Investors Service said it affirmed EnerSys Inc.'s corporate family rating at Ba1, probability of default rating at Ba1-PD, $300 million senior unsecured notes at Ba2 and speculative grade liquidity at SGL-1.
Moody's withdrew the Baa3 rating on EnerSys' senior secured bank credit facility due 2018 after that facility was refinanced. Moody's did not rate the new bank credit facility.
The outlook is stable.
The agency said it expects that EnerSys will continue to meet technological challenges and maintain its leadership position in industrial battery market, along with financial flexibility to maintain leverage of less than 2.5x.
“Although the company has publicly stated that it is considering large acquisitions, the Ba1 CFR incorporates our expectation that most of these transactions will be financed in a manner that does not result in a meaningful deterioration in the company's credit metrics,” Moody’s said in a news release.
| Moody's said it expects that debt to EBITDA will remain under 2.5x through 2018 before considering the impact of a major acquisition. The agency also believes that acquisitions are unlikely to be transformative in nature and instead are more likely to supplement organic growth based on the company's historical acquisitions.
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| The agency said the SGL-1 rating reflects its view that the company will maintain a very good liquidity position through 2018.
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| The stable outlook reflects the expectation of free cash flow to debt of at least 15% and only moderate sized acquisitions, at a pace consistent with the last several years and all in the core battery market. Debt to EBITDA is expected to range between 2.2x and 2.7x, at the high end only for a short period as the company integrates an acquired business.
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