Moody’s gives B3 to Kratos notes

Moody's Investors Service said it assigned a B3 rating to the planned senior secured notes due 2025 of Kratos Defense & Security Solutions, Inc.

Kratos' existing ratings, including the B3 corporate family rating and speculative grade liquidity of SGL-2, are unaffected.

Proceeds, along with cash on hand of about $100 million, will fund redemption of the existing $373 million 7% senior secured notes due 2019. Following the transaction, Moody's said it expects that the cash balance should be around $140 million.

The agency expected much of the proceeds from Kratos' recent primary equity issuance to be applied to debt reduction.

Moody’s said the ratings reflect the expectation of an improved but still high level of financial leverage, at mid-6 times (Moody's adjusted basis) pro forma for the redemption/note issuance, with about $10 million to $15 million of free cash flow generation near-term.

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