Moody's rates SRAM loans Ba3

Moody's Investors Service said it assigned B2 corporate family and probability-of-default ratings to SRAM Corp. and Ba3 (LGD3, 31%) ratings to the company's proposed $25 million senior secured revolving credit facility due 2014 and $240 million senior secured term loan due 2014.

The outlook is stable.

The roughly $600 million of proceeds from the new credit facility, new unrated subordinated debt and an equity contribution of preferred stock will be used to fund a minority investment in SRAM, to pay dividends to existing shareholders and to refinance existing debt.

The agency said the ratings reflect SRAM's modest scale, relatively high adjusted financial leverage of over 5 times, narrow product focus on bicycle parts, a history of shareholder-friendly activity and modest operating cash flow.

SRAM's ratings benefit from its strong market position within the bicycle component industry, its extensive product portfolio within the premium bicycle parts, strong brand recognition among bike enthusiasts and stable high single-digit/low-double-digit operating margins, Moody's said.

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