Moody's rates American Residential loans B2

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to American Residential Services, LLC and B2 (LGD3, 33%) ratings to its proposed $50 million senior secured first-lien revolving credit facility and $150 million senior secured first-lien term loan. The outlook is stable.

The proceeds of the loans, along with a $60 million second-lien credit facility (not rated by Moody's) and new cash equity received as part of the April acquisition of American Residential Services by Charlesbank Equity Fund VII, LP, will be used to refinance existing debt.

The agency said American Residential Services' B3 corporate family rating reflects the lower debt and leverage (5.6 times) that will result from the new capital structure and is supported by the company's good market positions, moderate geographic diversity and good track record of acquiring and integrating strategic businesses.

At the same time, the ratings are constrained by Moody's expectation that American Residential Services' debt levels will increase over the next few years to fund an active acquisition growth strategy, and other restricting factors include the high level of competition in the fragmented HVAC and plumbing services industries, the seasonal nature of its businesses and exposure to variations in weather in its operating regions.

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