Moody's cuts Engility, loan

Moody's Investors Service said it revised the ratings of Engility Corp. to incorporate the lower debt level now planned in its capital structure following the company's spin-out from L-3 Communications Holdings, Inc.

According to Moody's, the new beginning debt load consists of a $335 million term loan instead of the previously planned $450 million. The agency said the corporate family rating has been revised to Ba3 from B1 to reflect the greater credit resiliency expected from the lower beginning debt amount.

Additionally, the agency said the rating on the senior secured facility has been changed to Ba2 from Ba1 due largely to the elimination of the unsecured tranche.

The agency said it also changed the family recovery assumption to 65%, from 50%, resulting in continuation of the previously assigned B1 probability of default rating.

Moody's said the corporate family rating reflects the expectation of debt to EBITDA remaining below 4x with beginning leverage, proforma for the transaction, of about 2.6x on a Moody's adjusted basis.

Although, the agency said it expects revenue and margin pressure to pose an operating headwind, the moderate beginning leverage level provides a reasonably good buffer from which Engility can execute its planned operational restructuring.

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