Moody's rates Rent-A-Center notes Ba3

Moody's Investors Service said it assigned a Ba3 rating (LGD5, 79%) to Rent-a-Center, Inc.'s proposed $300 million guaranteed senior unsecured notes due 2020.

In addition, Moody's upgraded the company's probability-of-default rating to Ba2 from Ba3 and affirmed its Ba2 corporate family rating and Ba1 (LGD2, 25%) senior secured bank facility ratings.

The outlook is stable.

Proceeds will be used to repay approximately $200 million of senior secured bank debt, and the remaining net proceeds will be used to repurchase shares of the company's common stock.

Moody's said the upgrade reflects the company's improved operating performance and more manageable debt maturity profile pro forma for the proposed note offering.

"The affirmation of the Ba2 corporate family rating reflects RCII's relatively strong debt protection measures, good liquidity and leading position in the consumer rent-to-own industry," Bill Fahy, a senior analyst at Moody's, said in a statement.

"However, ratings are constrained by the impact on operating performance from a shift in RCII's customer and product mix in its core business, the potential impact from new government legislation, and the challenges of the company expanding outside of its core U.S. markets."

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