Moody's gives Flow Control loans B2, Caa2

Moody's Investors Service said it assigned ratings to FCG Acquisitions, Inc. (Flow Control Group,) with B2 to the proposed first-lien credit facilities, a Caa2 rating to the $110 million second-lien term loan. The agency also gave a B3 corporate family rating and a B3-PD probability of default rating.

Loan proceeds, along with $613 million in equity, including rollover and preferred equity, will be used to fund the company's acquisition by KKR & Co. Inc. The first-lien senior secured credit facilities will include an $80 million revolving credit facility, a $525 million senior secured first-lien term loan and a $100 million delayed draw term loan.

“Flow Control Group is likely to have high financial leverage as a consequence of its highly acquisitive business model, which goes to the governance risk,” Moody’s said in a press release.

“The company has generated thin free cash over the past few years: less than $5 million annually since FY 2017 and approximately negative $2 million in the first half of FY 2021. Moody's expects more robust levels of free cash flow starting in in the second half of FY 2021, which will be important to support the proposed debt levels,” the agency said.

The outlook is stable.

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