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Moody's rates Rental Service loans Ba2, B3; notes Caa1
Moody's Investors Service said it assigned B2 corporate family and probability-of-default ratings and an SGL-2 speculative grade liquidity rating to Rental Service Corp., a Ba2 rating with a loss-given-default assessment of LGD2 (21%) to its $1.7 billion first-lien senior secured credit facility - which includes a $1.3 billion revolving credit facility and $400 million term loan - a B3 rating with a loss-given-default assessment of LGD4 (67%) to the company's $1.13 billion second-lien senior secured term loan and a Caa1 rating with a loss-given-default assessment of LGD6 (91%) to its $620 million senior unsecured notes.
The outlook is stable.
Proceeds from the credit facilities will be used to fund the acquisition of Rental Service by Ripplewood Holdings LLC and Oak Hill Capital Management LLC for $3.4 billion. The acquisition will also be funded with $250 million of equity from each of the sponsors and rollover equity of $85 million from Atlas Copco AB, Rental Service's existing owner.
The agency said the ratings reflect Rental Service's leading competitive position in the North American equipment rental industry. The company is benefiting from the strong non-residential construction market, and the strength of non-residential construction activities has led to higher demand for rental equipment and rising rental rates.
However, Moody's predicted that the increased level of debt resulting from the leveraged buyout will stress the company's financial metrics, including a likely rise in the debt-to-EBITDA ratio to 4.3x from 3.6x.
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