Moody’s ups Vertex, rates loan B1

Moody’s Investors Service said it raised Vertex Aerospace Services Corp.’s ratings, including its corporate family rating to B1 from B2. The agency also gave a B1 rating to Vertex’s planned incremental first-lien term loan.

Moody's said it also assigned an SGL-2 speculative grade liquidity rating to Vertex. The agency revised the outlook to stable from rating under review. This concludes the review for upgrade initiated on March 8.

“The upgrades reflect Vertex's increased size and enhanced technology and service capabilities resulting from the merger with Vectrus. This will better position the company for future contract wins in the competitive government services contractor market. The upgrades also reflect the deleveraging nature of the transaction, with pro forma debt to EBITDA declining by almost one turn to 4.7x, as well as Moody's expectations of robust cash generation in 2023 and beyond, which will provide good financial flexibility,” the agency said in a press release.

The loan proceeds will be primarily used to repay debt as part of the pending all-stock merger between Vertex and Vectrus, Inc. The merger is expected to close in the third quarter of 2022.

The stable trend reflects expectations for earnings growth and healthy cash generation, particularly in 2023, and Vertex's healthy backlog and good contract diversity, Moody’s said.

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