Approximately $765 million bank debt affected
New York, November 15, 2012 -- Moody's Investors Service assigned a Ba3 rating to the $100 million incremental first lien term loan offered by Allied Security Holdings LLC's ("Allied"). Concurrently, Moody's affirmed all of the company's existing ratings, including the B1 Corporate Family Rating ("CFR"). The ratings outlook remains stable.
Proceeds from the incremental term loan, $15 million revolver borrowings and $15 million balance sheet cash will be used to fund a $125 million shareholder dividend. The company is seeking an amendment to its existing credit facilities to allow the special dividend and modify covenants to reflect the increased debt levels, and reset call protection. All other material terms of the first and second lien credit agreements are expected to remain the same.
.. Issuer: Allied Security Holdings LLC
.. Corporate Family Rating at B1
.. Probability of Default Rating at B1
. $80 million first lien revolving credit facility due 2016 at Ba3 (LGD3, 37%)
. $420 million first lien term loan due 2017 at Ba3 (LGD3, 37%)
. $165 million second lien term loan due 2018 at B3 (LGD5, 89%)
. $100 million first lien term loan due 2017 at Ba3 (LGD3, 37%)
The ratings are contingent upon the receipt and review of final documentation.
The B1 Corporate Family Rating ("CFR") is constrained primarily by a highly leveraged balance sheet and equity-friendly financial policies evidenced by debt-financed distributions to the company's private equity sponsor and other shareholders, and the company's willingness to execute debt-financed acquisitions. The CFR also reflects the company's operations in the intensely competitive and fragmented US security services industry. Nevertheless, the rating benefits from the recession-resistant nature of the security services business, and Allied's leading position and good liquidity profile, including stable cash flow generation in the mid-to-high single digit range as a percentage of debt.
The stable outlook reflects Moody's expectation that financial leverage will improve to the low 5 times debt/EBITDA range by the end of 2013 due to modest organic revenue and earnings growth.
Negative ratings pressure could result from incremental debt or deterioration in earnings that cause financial leverage to remain above 5.5 times. Additionally, a negative rating action may be taken if liquidity declines or if free cash flow to debt and interest coverage (EBITDA less Capex to Interest expense) fall below 4% and 1.7 times, respectively.
While an upgrade is unlikely in the near term, the ratings or outlook could be raised if Allied reduces debt such that financial leverage and free cash flow to debt can be sustained below 4 times and above 10%, respectively. An upgrade likely would require a commitment to more conservative long-term financial policies.
The principal methodology used in rating Allied Security Holdings LLC was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. 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.
Allied Security Holdings LLC ("Allied") is a leading provider of security services in North America. The company is privately-owned by affiliates of The Blackstone Group, institutional investors, and management. Allied reported approximately $1.9 billion of revenue for the twelve months ended September 30, 2012.
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