Moody’s rates NorthStar loan B2

Moody's Ratings said it assigned a B2 rating to the proposed backed senior secured first-lien term loan of NorthStar Group Services, Inc.

All other ratings for NorthStar, including the B2 corporate family rating, B2-PD probability of default rating and B2 rating on its existing backed senior secured first-lien term loans are unchanged.

The outlook is stable.

The proceeds from the new $740 million term loan maturing in 2030 will be used primarily to repay about $679 million outstanding on the company's existing term loans due 2026. The net proceeds will also be used to repay about $12 million drawn on the existing $100 million ABL (unrated) maturing in 2025, add to the cash balance and pay transaction fees and expenses.

Concurrently, NorthStar plans to raise a $100 million ABL revolver (unrated) expiring in 2029 to replace the existing ABL facility.

The company is also extending debt maturities and expects to reduce annual debt amortization requirements to 1% compared to the current requirement on the existing term loans, which has stepped up to 5% for 2024 from 2.5% through 2023.

“The transaction will increase financial leverage, with pro forma debt-to-EBITDA (including Moody's standard adjustments) of approximately 4.6x at Dec. 31, 2023,” the agency said in a news release.

“However, Moody's expects the ratio to improve over the next year absent any debt funded transactions that weaken the credit metrics.”

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