Moody’s eyes First Advantage for trim

Moody’s Investors Service said it placed First Advantage Holdings, LLC’s credit ratings under review for downgrade, including the B1 ratings on First Advantage's first-lien bank credit facilities. Previously, the outlook was stable.

First Advantage’s announcement that it plans to buy rival Sterling Check Corp. for about $2.2 billion, funded by a combination of cash and stock triggered the review, Moody’s said. First Advantage plans to fund the cash portion of the deal and retire Sterling’s debt through $1.8 billion of new debt, for which it has secured fully committed financing and the use of balance sheet cash. Both boards have approved the deal, which is expected to close in the third quarter of 2024.

“While the composition of First Advantage's future capital structure is uncertain, Moody's anticipates that the company's pro forma LTM debt/EBITDA (Moody's adjusted) will more than double (prior to including projected synergies) from First Advantage's current level of approximately 2.4x as of Dec. 31, 2023, putting downward pressure on the company's credit profile,” the agency said in a statement.

The review will analyze First Advantage's final debt capital structure, liquidity profile and financial and operating strategies, the agency said.

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