Moody’s assigns Ba2 to LKQ notes

Moody's Investors Service said it assigned a Ba2 rating to LKQ Italia Bondco SpA's €500 million senior unsecured notes due 2024. LKQ Italia Bondco is an indirect wholly owned subsidiary of LKQ Corp.

The new notes are expected to be guaranteed by LKQ and each of its 100% owned domestic subsidiaries that guarantee the company's existing senior secured credit facilities as well as certain other foreign subsidiaries that are subsidiaries of Rhiag-Inter Auto Parts Italia SpA.

Moody's affirmed all of LKQ's existing ratings, including its Ba1 corporate family rating, Ba1-PD probability of default rating and the Ba2 rating on its 4¾% $600 million senior notes due 2023.

The outlook is negative.

The proposed notes are being issued to term out a portion of the revolver borrowings used to fund its recent acquisitions. As a result, Moody’s said, the proposed transaction is leverage neutral. Net proceeds are expected to be used to repay about $542 million of revolver borrowings and pay related fees and expenses.

The proposed notes are in a slightly better credit position than LKQ's existing senior unsecured notes because they have a structurally senior claim on certain Italian assets and operations. However, the agency does not believe such assets are material enough to warrant a higher rating than the existing 2023 notes.

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