Moody's assigns B3 to Trace3, loan

Moody's Investors Service said it assigned first-time ratings to Escape Velocity Holdings, Inc. (Trace3), including a B3 corporate family rating, a B3-PD probability of default rating and B3 rating on the planned $415 million first-lien term loan due 2028. The outlook is stable.

“Trace3's B3 CFR reflects the company's high closing debt/EBITDA of 7x (as calculated by Moody's, excluding pro forma cost synergies and Covid-related disruptions) and smaller scale compared to competing IT value-added resellers and managed services firms,” Moody’s said in a press release.

The rating also considers Trace3’s specialization in emerging technology and software-focused IT solutions in higher growth areas such as hybrid cloud, security and network and data intelligence, and customer base of large Fortune 1,000 clients, the agency added.

The proceeds, a proposed issuance of an unrated $135 million second-lien term loan due 2029 and an unrated $150 million ABL revolver, expected to be undrawn at close, due 2026 will be used along with new sponsor equity to fund American Securities LLC's acquisition of Trace3.

“The stable outlook reflects Moody's expectation for Trace3 to rebound from the Covid pressures of fiscal year 2020 such that organic revenue and EBITDA achieve a grow rate of at least 20% through the last six months of fiscal year 2021,” the agency said.

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