S&P rates KAR Auction loan BB

Standard & Poor’s said it assigned a BB rating and 2 recovery rating to KAR Auction Services Inc.’s new credit facility consisting of a senior secured term loan B-3 due 2023 and revolver due 2021.

The 2 recovery rating indicates 70% to 90% expected default recovery.

All of the other ratings on KAR are unchanged.

The company is undertaking this refinancing in order to extend its debt maturities and to provide additional financial flexibility, S&P said.

KAR Auction’s term loan B-2 due 2021 will remain outstanding, the agency said.

The BB- corporate credit rating on KAR is based on an aggressive assessment of the company’s financial risk profile, which reflects its positive, but somewhat volatile free operating cash flow, S&P said.

The company’s business risk profile is considered fair, reflecting its established positions in the whole-car and salvage-auction markets, which are somewhat mitigated by its business concentration in North America and its strategic focus on growing through acquisitions, the agency said.

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