S&P trims Omnitracs, rates loans B-, CCC

S&P said it lowered the ratings on Omnitracs Holdings LLC and its first-lien loan to B- from B and assigned a B- rating to the planned incremental $160 million first-lien term loan and CCC to the $195 million second-lien term loan.

Proceeds will be used to acquire SmartDrive Systems Inc.

“Omnitracs’ pro forma leverage is expected to remain above 10x over the next 12 months due to $355 million of additional debt incurred to fund the SmartDrive acquisition, as well as immediate EBITDA margin dilution by four percentage points to about 15% on a pro forma basis from consolidating the less profitable SmartDrive business. This is well above the 7x leverage level we consider to be in line with a B rating,” the agency said in a press release.

S&P also revised the outlook on the issuer credit rating to stable from negative. “The stable outlook reflects our expectation that Omnitracs will successfully integrate SmartDrive and make progress in its product investment and cost reduction activities such that pro forma EBITDA margins improve to the mid- to high-teens area in fiscal 2021 and reduce leverage toward 10x,” the agency said.

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