Moody’s boosts Verra Mobility

Moody’s Investors Service said it upgraded Verra Mobility Corp.’s (VM Consolidated Inc.) backed senior secured first-lien term loan to Ba2 from Ba3, its senior unsecured notes to B2 from B3, the corporate family rating to Ba3 from B1 and its probability of default rating to Ba3-PD from B1-PD. The speculative grade liquidity rating remains unchanged at SGL-1.

The upgrade reflects Verra Mobility's robust financial operating results in 2023 and an expectation for mid-single digit revenue growth, EBITDA margins sustained over 40%, debt to EBITDA below 3x after expensing capitalized software costs, interest coverage, as measured by EBITA to interest, above 4x, and healthy free cash flow of about $120 million including one-time legal settlement payments in FY2024, the agency said.

“Verra Mobility's credit metrics will continue to trend favorably from revenue and earnings growth, driven broadly by continuing growth in U.S. travel volumes and favorable secular trends towards adoption of cashless tolling in the U.S. and Europe and integration of technology into traffic safety and parking in the U.S.

“The ratings upgrade also considers the potential that the company will engage in debt-funded acquisitions given the company is currently operating below its public long-term net leverage target of 3.5x relative to 2.5x at FY2023 (management's calculation),” Moody’s said in a press release.

The outlook is maintained stable.

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