Moody’s rates Realogy notes Caa1

Moody’s Investors Service said it assigned a Caa1 rating to Realogy Group LLC’s planned $600 million of senior unsecured notes due 2029. Simultaneously, Moody’s upgraded Realogy’s senior secured bank credit facility to Ba2 from Ba3 and affirmed its B2 corporate family rating, B2-PD probability of default rating, and B3 senior secured second-lien notes rating and Caa1 senior unsecured notes rating. The speculative grade liquidity rating remains SGL-2.

The Caa1 rating on the senior unsecured notes reflects the B2-PD PDR and a loss given default assessment of LGD5. The LGD assessment reflects the subordination to all the secured debt. The senior notes are guaranteed by substantially all of the company’s domestic subsidiaries (excluding the securitization subsidiaries), the agency said.

Realogy plans to use the note proceeds to refinance a portion of its loan A due 2023 and term loan B due 2025. Separately, the company intends to amend its credit agreement to extend all or a portion of the remaining balance of the term loan A and its revolving credit facility to 2025 from 2023 and lower the maintenance covenant requirement under its secured leverage ratio, Moody’s said.

The credit facility’s upgrade reflects the note issuance, which increases the proportional amount of the junior debt relative to the first-lien debt in Realogy’s pro forma capital structure. The notes would absorb more of the losses in a stress scenario, helping recovery prospects of the first-lien bank facility, the agency said.

“Although the proposed transactions are debt and leverage neutral, the issuances extend Realogy’s debt maturity profile from 2023 to 2025 and beyond, so the plan is a positive credit and liquidity development,” said Edmond DeForest, a Moody’s vice president and senior credit officer, in a press release.

The outlook is stable.

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