Moody's affirms Dayco on add-on

Moody's Investors Service said it affirmed Dayco LLC's B2 corporate family rating, its B2-PD probability of default rating and the B1 (LGD3) rating on subsidiary Dayco Products, LLC’s $445 million (upsized from $375 million) guaranteed senior secured term loan B. The outlook is stable.

Proceeds from the add-on, along with a $15 million draw on the company's European ABL revolver and cash on hand, will be used to fund a $125 million dividend to shareholders.

The agency said Dayco's B2 corporate family rating reflects the incremental leverage and interest cost associated with the additional debt burden used to fund the shareholder distribution transaction. As a result of the transaction, Dayco's ratio of debt to EBITDA is expected to increase to 4.4 times on a pro forma basis for the last 12 months ended May 31.

Dayco's ratings continue to benefit from the company's position as a leading supplier of belts, tensioners and pulleys in the automotive and industrial markets and balanced revenue profile through exposure to the original equipment market and the aftermarket, Moody’s said.

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