Moody’s gives Franchise loans Ba3, B3

Moody’s Investors Service said it gave ratings to Franchise Group, Inc.’s planned senior secured term loans, with Franchise Group Newco PSP, LLC as co-borrower, including a Ba3 rating on the planned $1 billion first-lien senior secured term loan and a B3 rating on the proposed $300 million second-lien senior secured term loan.

Concurrently, Moody’s affirmed Franchise Group’s B1 corporate family rating and B1-PD probability of default rating. Franchised Group’s SGL-2 speculative grade liquidity rating is unchanged.

“The Ba3 rating on Franchise Group’s proposed $1 billion first-lien 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 proposed $150 million ABL revolving credit facility (not rated by Moody’s). The B3 rating on the proposed $300 million second-lien senior secured term loan reflects its junior claim position relative to both the first-lien senior secured term loan and ABL,” the agency said in a press release.

Proceeds will be used to acquire Pet Supplies Plus, refinance Franchise Group indebtedness and pay transaction fees and expenses.

The outlook is stable.

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