Moody’s assigns Franchise Group B1

Moody’s Investors Service said it assigned ratings to Franchise Group, Inc., including a B1 corporate family rating and B1-PD probability of default rating. Moody’s also assigned an SGL-2 speculative grade liquidity rating, reflecting its expectation for good liquidity.

Simultaneously, Moody’s assigned ratings to the planned term loans for Franchise and Franchise Group Newco PSP, LLC as co-borrower, including a Ba3 rating to its $750 million first-out senior secured term loan, a B2 rating to its $250 million last out senior secured term loan and a B3 rating to its $300 million unsecured term loan.

“The Ba3 rating on Franchise Group’s proposed $750 million first-out senior secured term loan reflects first-lien claim on substantially all assets of the borrower and guarantors, other than receivables and inventory, on which it will have a second-lien position behind the company’s $225 million ABL revolving credit facilities (not rated by Moody’s). The B2 rating on the proposed $250 million last-out senior secured term loan reflects its junior claim position relative to both the first-out senior secured term loan and ABL. The B3 rating on the proposed $300 million unsecured term loan reflects its junior position to the sizeable amount of secured debt in the capital structure,” the agency said in a press release.

Franchise will use the proceeds to acquire Pet Supplies Plus, refinance debt and pay related fees and expenses.

Moody’s also assigned a stable outlook. The outlook reflects the expectation that Franchise Group will maintain moderate leverage and improve interest coverage while maintaining dividends and pursuing organic and acquisitive growth over the next 12 months, the agency said.

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