Fitch assigns B+ to ADS, loan BB-

Fitch Ratings said it assigned ADS Tactical, Inc. a B+ long-term issuer default rating and BB-/RR3 ratings to the company's first-lien secured term loan. The outlook is stable.

“ADS's ratings reflect the company's position as the largest small business supplier to the U.S. Department of Defense, with an estimated 75% market share on the $33 billion Special Operation Equipment Tailored Logistic Support (SOE TLS) contract (around 80% ADS' revenues).

“The ratings are also supported by ADS's strong order backlog (> 1x revenue as of September 2023), which provides revenue and EBITDA visibility for the next year-plus, as well as its value-added, salesforce-focused, commercial off-the-shelf (COTS) procurement model. Management is also taking organic and inorganic steps to further diversify its revenue mix and enhance its solutions-linked platform exposure,” Fitch said in a press release.

The agency also noted, “ADS consistently generates low mid-single digit EBITDA margins as a value-added distributor of military equipment.”

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