Moody’s affirms USI after loan add-on

Moody’s Investors Service said it affirmed the B3 corporate family rating and the B3-PD probability of default rating of USI, Inc. following news that the company plans to increase its senior secured term loan by $230 million to about $1.4 billion.

The proceeds will be used from this borrowing to pay a dividend to shareholders, Moody’s said.

The agency also said it affirmed the B1 (LGD 3) rating on the company’s $150 million senior secured revolving credit facility due December 2017; B1 (LGD 3) rating on its $1.4 billion senior secured term loan due December 2019; and Caa2 (LGD 5) rating on its $630 million senior unsecured notes due January 2021.

The outlook is stable.

A debt-funded dividend to shareholders is credit negative, Moody’s said, but USI has demonstrated its ability to reduce financial leverage and leverage is expected to come down in the year ahead.

The ratings reflect the company’s favorable market position, good balance of property and casualty and employee benefits business and healthy free cash flow, the agency said.

These strengths are offset by the company’s aggressive financial leverage and weak interest coverage in recent years, exacerbated by acquisitions, Moody’s added.

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