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S&P rates Ritchie Bros. loan BBB-, notes BB-
S&P said it assigned a BB long-term corporate credit rating to Ritchie Bros. Auctioneers Inc.
The outlook is stable.
The agency also said it assigned a BBB- rating and 1 recovery rating to the company's existing $675 million revolving credit facility and $325 million term loan.
S&P also said it assigned a BB- rating and 5 recovery rating to the company's proposed $500 million unsecured notes. The 5 recovery rating indicates 10% to 30% expected default recovery.
Because the recovery on the notes is at the lower end of the range, if the unsecured notes are upsized to more than $500 million, the agency said it could revise the recovery rating to 6, which indicates 0 to 10% expected default recovery.
The company recently said it will acquire IronPlanet for about $784 million, closing the deal by mid-2017.
The proceeds from the proposed issuance and term loan will be used to fund the acquisition, S&P said.
Concurrent with the acquisition, the unsecured credit facilities will become secured by the assets of the combined Ritchie and IronPlanet entity, the agency said.
The recovery analysis is based on an expectation that the company's revolving facility and term loan will remain secured at the time of default, S&P added.
Based on the credit agreement, the facilities may release the security if the corporate credit rating is investment-grade or the consolidated leverage ratio is less than 3x for two consecutive quarters, the agency noted.
The ratings also reflect the company’s fair business risk profile and its operations in the highly fragmented and competitive used equipment reselling business, along with limited geographic diversity and low barriers to entry, S&P said.
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