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Moody’s rates Ritchie Bros. loans Ba2, notes B2
Moody's Investors Service said it assigned a Ba3 corporate family rating and Ba3-PD probability of default ratings, to Ritchie Bros. Auctioneers Inc.
The agency also assigned Ba2 ratings to the senior secured credit facilities, a B2 rating to the senior unsecured notes and an SGL 2 speculative grade liquidity rating.
The outlook is stable.
Proceeds from the $500 senior notes, $675 million senior secured revolver (of which about $59 million will be drawn at closing), $325 million delayed-draw senior secured term loan (which can only be used to acquire IronPlanet), about $92 million cash from the balance sheet and roll-over equity options will be used to (a) purchase IronPlanet Holdings, Inc. for about $784.3 million; (b) repay existing Ritchie debt of about $148 million; and (c) leave about $81 million of cash on the balance sheet.
The company is expected to acquire IP (subject to regulatory approval) in the second half of 2017.
Moody’s said the ratings are supported by Ritchie’s leading position in industrial auctions, in particular for its core business of live unreserved auctions, with good brand awareness and customer loyalty.
They also reflect moderate pro forma leverage of about 3.8 times (on a Moody's adjusted basis, at Sept. 30), high 30% EBITDA margins and mid-single digit free cash flow to debt (measured after dividends).
The acquisition of IronPlanet will substantially enhance Ritchie’s online industrial auction presence, the agency explained, which is expected to be a strong revenue growth area, albeit off a small base currently.
The rating also reflects exposure to multiple industry sectors for its auction products.
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