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Moody’s rates Recess loan B2
Moody’s Investors Service said it assigned a B2 rating to Recess Holdings, Inc.’s planned first-lien term loan due 2027.
The agency said it also affirmed Recess’ B2 ratings and the B1 rating on the outstanding first-lien senior secured term loan due 2024 and the Caa1 rating on the second-lien senior secured term loan.
Recess wants to secure an upsized $640 million first-lien senior secured term loan and use it to repay the existing $396 million first-lien term loan and the roughly $145 million of debt outstanding on the second-lien term loan.
The transaction will also provide $87 million of cash on the balance sheet to fund future acquisitions. The maturity on the first-lien term loan will be March 2027, which is an extension from the September 2024 maturity of the current first-lien term loan. Recess is also raising the commitment on its asset-based lending revolving credit facility to $125 million from $105 million and extending the maturity by two years to September 2026, Moody’s said.
“The B2 rating on the proposed first-lien term loan is a notch lower than the B1 rating on the existing first-lien term loan due to the change in the capital structure involving the repayment of the second-lien term loan and the increase in the size of the ABL. The first-lien term loan now represents the preponderance of the obligations in the capital structure,” the agency said in a press release,” the agency said in a press release.
“The transaction is credit positive because it will provide meaningful liquidity, position the company for further growth, and address the 2024 maturities. The transaction will increase leverage but to a range that remains modest for the rating. Moody's expects debt to EBITDA will increase to around 3.3x pro forma for the transaction from 2.8x (Moody's adjusted for the last 12 months ended March 2023),” Moody’s noted.
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