Moody's rates Rent-A-Center loans Ba1

Moody's Investors Service said it assigned Ba1 (LGD2, 23%) ratings to Rent-A-Center, Inc.'s proposed senior secured credit facilities, which consist of a $500 million revolving credit facility due 2019 and a $350 million term loan due 2021. The company's Ba3 corporate family rating, Ba3-PD probability of default rating and B1 (LGD5, 75%) senior note rating are unchanged and remain on review for downgrade. The company's SGL-4 speculative grade liquidity rating is also unchanged.

Proceeds will be primarily used to refinance Rent-A-Center's existing term loan and revolving credit facility. The agency said completion of the refinancing transaction would result in an improvement in Rent-A-Center's liquidity by providing ample cushion under new financial maintenance covenants and increasing excess borrowing capacity under its revolver, which will be needed to fund sizable cash shortfalls in 2014.

The review remains focused on Rent-A-Center's ability to complete the refinancing transaction as proposed. Moody's expects to upgrade the speculative grade liquidity rating to SGL-3, confirm the remaining ratings and assign a negative outlook.

The confirmed Ba3 corporate family rating would reflect Rent-A-Center's weaker-than-expected operating performance and the expectation that metrics will remain weak over the next 12 to 18 months as the company executes, and invests in, its multi-year strategy to transform its business, Moody's said.

The agency said the confirmed Ba3 corporate family rating would also reflect Rent-A-Center's track record of maintaining relatively strong and stable debt protection measures.

The negative outlook would reflect the ongoing challenges facing the company's core customer, which consist of individuals that are cash and credit constrained, Moody's added.

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