S&P gives American Auto loans B-, CCC

S&P said it gave B- issue and 3 recovery ratings to American Auto Auction Group LLC’s planned $60 million undrawn cash flow revolver and $570 million first-lien term loan. The 3 recovery rating indicates a meaningful recovery (50%-70%; rounded estimate: 55%) in default. The agency also assigned the planned $180 million second-lien term loan a CCC issue-level rating with a 6 recovery rating, indicating negligible recovery (0%) in default.

Concurrently, S&P gave the company a B- issue rating. “AAAG's credit metrics are expected to remain consistent with a highly leveraged financial risk profile in the projection period through 2023 based on our assessment of the financial sponsor's likely financial policies. We expect leverage to remain over 8x over in the projection period, though the company's capex requirements are relatively modest and free operating cash flow (FOCF) to debt is expected to average 3%-5% over the same period,” the agency said in a press release.

The company will use the term loans to finance the acquisition of AAA Partners, refinance indebtedness and pay related transaction fees and expenses.

The outlook is stable.

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