Moody's rates Engility loans Ba1, notes B2

Moody's Investors Service said it assigned B1 corporate family and probability of default ratings to Engility Corp.

According to Moody's, Engility will be spun-off of L-3 Communications Holdings, Inc. and will raise debt of $450 million to fund a dividend to L-3 at separation. Moody's said a low initial debt to revenue ratio of only 34% supports the rating because the agency thinks that defense service contractors will face margin pressure in coming years as tighter federal procurement practices take hold.

Additionally, the agency said it expects Engility's revenues to decline as U.S. troops prepare to leave Afghanistan by 2014. The rating is stable.

The agency said it also assigned Ba1 LGD2 ratings to the company's $100 million first lien revolver due 2017 and $200 million first lien term loan due 2017. The company's $250 million senior unsecured notes due 2019 were assigned a rating of B2 LGD5.

The company's speculative grade liquidity was rated SGL-2.

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