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Moody’s rates Discovery Energy, loan B1
Moody's Investors Service said it assigned Discovery Energy Holding Corp. a B1 corporate family rating, a B1-PD probability of default rating and a B1 rating to DEHC's planned $1.625 billion backed senior secured first-lien term loan. The outlook is stable.
“DEHC's ratings reflect the company's good size and scale as a manufacturer of backup generators (gensets), gas and diesel engines, and electric power train components. DEHC has a healthy assortment of product offerings sold through its industrial energy systems, powertrain technologies, and home energy operating segments. The company has a broad geographic presence with a global sales and manufacturing footprint,” the agency said in a press release.
“However, DEHC competes against much larger players in its core commercial and industrial genset offerings, including Caterpillar Inc. and Cummins, Inc. DEHC also competes against Generac Holdings Inc. in the Home Energy space. In addition, DEHC will be carved out from the Kohler Corp. and Moody's believes there is execution risk associated with the transition as the company establishes standalone processes, systems and governance,” Moody’s noted.
The agency said it estimates DEHC’s pro forma adjusted debt-to-last 12 months EBITDA at about 5.7 times at Sept. 30. “Moody's expects margin stability over the next 12 to 18 months as favorable pricing, an ongoing mix-shift to sales of higher margin products and continued SKU rationalization will be largely offset by higher costs.”
Term loan proceeds, $50 million of borrowings from a new $400 million unrated asset-based lending facility, equity from private equity sponsor Platinum Equity Advisors, LLC, and rolled equity from the Kohler Corp. (existing owner) will be used to buy Kohler's former energy unit, Kohler Energy.
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