Moody’s gives Booz Allen facility Ba2

Moody's Investors Service said it affirmed the Ba2 corporate family rating of Booz Allen Hamilton, Inc. and assigned a Ba2 rating to the company's planned first-lien bank facility.

Concurrently, the speculative grade liquidity rating was lowered to SGL-2 from SGL-1.

The outlook remains stable.

The planned first-lien bank facility, among other revisions to the existing facility, extends maturities, augments covenant test thresholds and is debt neutral.

The Ba2 corporate family rating reflects Booz Allen’s well-known consulting heritage which provides client intimacy, facilitates effective marketing, and has produced good scale with low contract concentration, Moody’s said.

The rating envisions debt/EBITDA in the low 3 times range with funds from operation/debt just above 20%, supportive credit metrics and U.S. defense outlays should annually grow in the low single digit percentages beginning in 2017.

Special dividends will probably remain a feature of Booz Allen’s capital deployment, keeping free cash flow low versus other defense contractors at Ba2, but are unlikely to necessitate borrowing, according to the agency.

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