Moody's rates TruGreen loans B1

Moody's Investors Service said it affirmed TruGreen LP's B2 corporate family rating and B2-PD probability of default rating following news of the company's debt-financed share repurchase and recapitalization.

Moody's also said it assigned B1 (LGD 3) ratings to the company's new senior secured first-lien revolver and term loan.

No action has been taken on the existing first-lien debt.

The outlook is stable.

TruGreen plans to raise $965 million of new first-lien term debt to repay its existing $790 million first-lien term loan and repurchase the 30% equity stake held by the Scotts Miracle-Gro Co.

About $79 million of cash from the balance sheet also will be used to effect the repurchase, Moody's said.

The agency said it views the transaction as a credit negative development given that it increases leverage from about 5.1x to 5.8x.

It also raises cash interest expense by about $12 million, Moody's said.

Leverage will remain elevated with only modest improvement expected in revenue and earnings growth, the agency said, and notwithstanding the new management team's focus on growth.

The ratings reflect the company's market leading position and historic stability balanced by a large debt burden, Moody's added.

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