New York, November 14, 2012 -- Moody's Investors Service affirmed WESCO International, Inc.'s (parent of WESCO Distribution, Inc.) Ba3 corporate family rating and Ba3 probability of default rating. Moody's also assigned a Ba3 rating to the proposed $755 million senior secured term loan facility due 2019, consisting of a $605 million tranche that is an obligation of WESCO Distribution, Inc. and a CAD$150 million tranche that is an obligation of WDCC Enterprises Inc. (a Canadian holding company that will have an ownership interest in the assets of EECOL Electric Corporation -- "EECOL"). Moody's lowered the rating on WESCO Distribution, Inc.'s$150 million 7.5% senior subordinated notes due 2017 to B2 from B1. As part of this action, Moody's assigned an SGL-2 speculative grade liquidity rating. The ratings outlook remains stable.
As part of the financing, WESCO plans to expand the revolving credit facility due August 2016 (unrated), increasing the commitment to $600 million from a current size of $400 million. WESCO will also increase the size of the accounts receivable facility due August 2014 to $475 million from $450 million. Proceeds from the expanded revolving credit facility and accounts receivable facility, combined with proceeds from the proposed term loan facility will be used to fund the previously announced acquisition of EECOL for CAD $1.14 billion.
The acquisition will materially increase debt levels, and weaken credit metrics and liquidity over the near-term. We expect, however, that leverage will decline to the 3.5 times range over the next 12 to 18 months, owing to modest organic growth, the contribution from EECOL and other acquisitions completed in 2012, and debt reduction. The rating also considers the strategic benefits of the acquisition, which among other things, further strengthens the company's presence in Western Canada.
The downgrade of the senior subordinated notes rating reflects a significant increase senior secured debt in the pro forma capital structure (as per Moody's Loss Given Default Methodology).
The SGL-2 speculative grade liquidity rating reflects Moody's expectation that WESCO will maintain a good pro forma liquidity over the next twelve months, supported by expectations of solid free cash flow generation and solid headroom under revovler financial covenants. Weighing down on liquidity is the fact that the acquisition will materially reduce availability under the company's revolving credit facility and accounts receivable facility.
The following summarizes the ratings activity.
WESCO International, Inc.
Corporate family rating at Ba3
Probability of default rating at Ba3
Speculative grade liquidity rating at SGL-2
WESCO Distribution, Inc.
Proposed $605 million senior secured term loan due to 2019 at Ba3 (LGD3, 46%)
$150 million 7.5% senior subordinated notes due 2017 to B2 (LGD5, 83%) from B1 (LGD5, 70%)
WDCC Enterprises Inc. Rating assigned: Proposed CAD$150 million secured term loan due to 2019 at Ba3 (LGD3, 46%)
WESCO's Ba3 rating is supported by its moderate pro forma leverage, good coverage with EBITDA less capex to interest of 5.0 times expected near-term, and solid free cash flow generation through cycles. The rating is also supported by WESCO's business position as one of the few players of scale in the highly fragmented U.S. electrical distribution industry, a substantial revenue base, extensive product breadth, and good customer diversity. The Ba3 rating also considers WESCO's inherently thin operating margins as a distributor, the cyclicality of the business, limited global diversification, and a significant increase in acquisition activity that has weakened credit metrics.
The stable outlook reflects Moody's expectation that WESCO will continue to grow its revenue and earnings supported by modest economic growth in the U.S., and that it will refrain from additional debt financed acquisitions over the near term and apply free cash flow to debt reduction. The outlook also reflects Moody's expectation that WESCO will not encounter unforeseen challenges as it integrates EECOL.
The ratings could be upgraded if WESCO successfully integrates EECOL and increases profitability such that debt to EBITDA approaches 3.0 times and EBITDA less capex to interest expense exceeds 5.0 times while maintaining strong levels of free cash flow through business cycles. A ratings upgrade would also require that WESCO maintain a conservative financial policy with respect to shareholder enhancement activities and acquisitions.
The ratings could be downgraded if financial policy becomes more aggressive and/or an economic downturn leads to a contraction in profitability and operating margins such that debt to EBITDA approaches 5.0 times.
The ratings are subject to Moody's review of final documentation.
The principal methodology used in rating WESCO International, Inc. was the Global Distribution & Supply Chain Services Industry Methodology published in November 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
WESCO International, Inc. is one of the leading providers of electrical construction products and electrical, industrial, and communications maintenance, repair and operating supplies ("MRO") in North America. The company reported sales of $6.5 billion for the twelve months ended September 30, 2012.
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Daniel Marx Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Alexandra S. Parker MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.
Heute im Fokus
Buffett-Investment BYD träumt vom Gigaerfolg in den USA. AIG schlägt Milliardenrisiken an Berkshire Hathaway los. Deutsche Top-Manager warnen Trump vor Strafzöllen und Abschottung. American Express verdient deutlich weniger. Chinas Wachstum fällt auf niedrigsten Stand seit 1990. Winterkorn bleibt dabei: Von Betrug bei VW nichts gewusst.