Moody’s assigns Liberty Tire, loans B3

Moody’s Investors Service said it assigned first-time ratings to LTR Intermediate Holdings, Inc. (Liberty Tire), the direct parent of Liberty Tire Recycling Holdco, LLC, including a B3 corporate family rating, a B3-PD probability of default rating and a B3 rating on the company’s proposed senior secured first-lien bank credit facility, consisting of a revolving credit facility and term loan.

“The ratings reflect Liberty Tire’s modest scale with a niche market focus of scrap tire collection and recycling, its elevated leverage with debt-to EBITDA approaching 6x (after Moody’s standard adjustments), and the challenge of matching used tire (inbound) collections with profitable and sustainable demand for the company’s (outbound) end products,” the agency said in a press release.

The $410 million first-lien term loan’s proceeds, along with cash equity from new sponsor Energy Capital Partners, will be used to fund the buyout of Liberty Tire, including the repayment of all its debt, distributing a dividend to outgoing shareholders and covering transaction fees.

A new $60 million 5-year revolving facility, also to be issued, will be undrawn at close.

“The stable outlook reflects Moody’s expectation of steady inbound collections, priced with sound economics for the company, and process improvements to drive modest organic revenue and earnings growth into 2022, and support an improvement in credit metrics and free cash flow generation,” the agency said.

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