Moody's rates Evergreen loans B2, Caa1

Moody's Investors Service said it upgraded the corporate family and probability of default ratings of Evergreen International Aviation, Inc. to B3 from Caa1 and assigned a B2 (LGD3, 33%) rating to the new $200 million first-lien credit facility due 2015 and a Caa1 (LGD5, 78%) rating to the new $110 million second-lien credit facility also due 2015.

Evergreen used the proceeds of these new credit facilities to refinance its existing bank credit facilities, of which the first-lien had a near term maturity in October.

The outlook is stable. These actions resolve the review for upgrade that Moody's initiated on Dec. 9, 2010.

The upgrades of the family ratings and the stable outlook reflect the belief that Evergreen's air freight and helicopter operations should generate sufficient cash flow to allow the company to meet the debt service obligations of the refinanced capital structure, the agency said.

The ratings recognize the stabilizing effect on operations of being a key supplier to the U.S. Department of Defense as well as a long history of providing service to the Department of Defense's Air Mobility Command under the Civil Reserve Air Fleet program, the agency added.

The ratings consider the potential for softening demand in the air freight operations, both from the AMC and commercial customers; a corporate governance structure characterized by a single shareholder and a board with no independent directors; and modest levels of headroom under financial covenants in the new credit facility, the agency noted.

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