Moody's affirms Rent-A-Center

Moody's Investors Service said it affirmed the ratings of Rent-A-Center Inc. and maintained a stable outlook following the company's announcement that it will acquire Rainbow Rentals Inc. for about $100 million, which will be financed with both cash on the balance sheet and borrowings under the company's existing revolver.

Ratings affirmed include the company's Ba2 rated $490 million senior secured bank facilities and B1 rated $300 million seven-year senior subordinated notes, as well as the company's Ba3 senior unsecured issuer rating.

Moody's said the affirmation reflects the fact that the transaction will have minimal impact on the company's financial flexibility and credit metrics. The company has sufficient cash on balance sheet - $156 million at the end of the third quarter - to fund the entire purchase price; it also has the capacity to borrow the entire amount under its existing credit facilities. Any borrowings to finance the acquisition will only slightly weaken leverage and coverage ratios, the agency said.

The acquisition of Rainbow Rentals makes strategic sense, the agency said, and Rent-A-Center has a history of successfully integrating acquisitions. The current ratings have assumed that the company will continue to use internally generated cash for acquisitions.

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