U.S. markets close in 5 hours 16 minutes
  • S&P 500

    3,823.48
    -5.86 (-0.15%)
     
  • Dow 30

    31,126.03
    -275.98 (-0.88%)
     
  • Nasdaq

    13,165.35
    +45.92 (+0.35%)
     
  • Russell 2000

    2,169.47
    -30.70 (-1.40%)
     
  • Crude Oil

    61.99
    -1.54 (-2.42%)
     
  • Gold

    1,727.20
    -48.20 (-2.71%)
     
  • Silver

    26.38
    -1.31 (-4.71%)
     
  • EUR/USD

    1.2137
    -0.0049 (-0.40%)
     
  • 10-Yr Bond

    1.5130
    -0.0050 (-0.33%)
     
  • GBP/USD

    1.3970
    -0.0043 (-0.31%)
     
  • USD/JPY

    106.5610
    +0.3310 (+0.31%)
     
  • BTC-USD

    47,215.98
    -4,024.57 (-7.85%)
     
  • CMC Crypto 200

    947.17
    +14.04 (+1.50%)
     
  • FTSE 100

    6,476.82
    -175.14 (-2.63%)
     
  • Nikkei 225

    28,966.01
    -1,202.26 (-3.99%)
     

Kodiak BP, LLC -- Moody's assigns B1 CFR to Kodiak BP operating as Kodiak Building Partners, senior secured term loan rated B2; outlook stable

·16 min read

Rating Action: Moody's assigns B1 CFR to Kodiak BP operating as Kodiak Building Partners, senior secured term loan rated B2; outlook stableGlobal Credit Research - 19 Feb 2021New York, February 19, 2021 -- Moody's Investors Service (Moody's) assigned a first time B1 Corporate Family Rating (CFR) and B1-PD Probability of Default Rating (PDR) to Kodiak BP, LLC, operating as Kodiak Building Partners Inc. (Kodiak), a national distributor of building materials. Moody's also assigned a B2 rating to Kodiak's proposed senior secured term loan. The outlook is stable.Kodiak's capital structure will consist of a $200 million asset based revolving credit facility (not rated by Moody's) and a $540 million senior secured term loan. Proceeds from the term loan and available cash will be used to refinance Kodiak's existing debt of about $367 million, to fund a dividend to equity holders, affiliates of Court Square Capital Partners (CSC) and management, and to pay related fees and expenses.Governance characteristics Moody's considers in Kodiak's credit profile include an aggressive financial policy evidenced by its high leverage and debt financed dividend. CSC will have monetized nearly all of its investment in Kodiak with the payment of the proposed dividend after acquiring a majority ownership in Kodiak in December 2017. Moody's believes that the likelihood of a sale of the company is high since CSC is in its fourth year of its investment in Kodiak. Such action or further debt financed dividends that result in significant deterioration of credit metrics could affect Kodiak's long-term ratings.The following ratings are affected by today's action:Assignments:..Issuer: Kodiak BP, LLC.... Corporate Family Rating, Assigned B1.... Probability of Default Rating, Assigned B1-PD....Senior Secured Term Loan, Assigned B2 (LGD4)Outlook Actions:..Issuer: Kodiak BP, LLC....Outlook, Assigned StableRATINGS RATIONALEKodiak's B1 CFR reflects Moody's expectation that the company will remain highly leveraged. Moody's projects adjusted debt-to-LTM EBITDA will approximate 4.0x at year-end 2021. At the same time Kodiak faces strong competition and may face challenges integrating future bolt-on acquisitions. Providing an offset to Kodiak's leveraged capital structure is good profitability. Moody's forecasts adjusted EBITDA margin in the range of 7.5% - 10% for 2021, which is the company's greatest credit strength. Moody's also calculates interest coverage, measured as EBITA-to-interest expense, will be around 4.0x in late 2021.Additionally, Moody's forecasts that Kodiak will have good liquidity over the next twelve to 18 months. Good cash flow, ample revolver availability and no near-term maturities provide more than ample financial flexibility for Kodiak to integrate future bolt-on acquisitions and to contend with competition.Residential new construction (both single family and multi-family), from which Kodiak earns about 75% of revenue, is a source of strength. Moody's has a positive outlook for US Homebuilding with good growth expected. Non-residential construction (combined new construction and infrastructure), representing approximately 18% of revenue, is exhibiting relative long-term stability with opportunities even though new construction has contracted modestly. Moody's expects repair and remodeling activity, representing the remaining 7% of revenue, to remain strong over the twelve to 18 months.The stable outlook reflects Moody's expectation that leverage will not deteriorate over the next 18 months. A good liquidity profile and Moody's expectation that end market dynamics support growth further support the stable outlook.The B2 rating assigned to Kodiak's senior secured term loan, one notch below the Corporate Family Rating, results from its subordination to the company's asset based revolving credit facility. The term loan has a first lien on substantially all noncurrent assets and a second lien on assets securing the company's asset based revolving credit facility (ABL priority collateral).The senior secured term loan is expected to contain certain covenant flexibility for transactions that can adversely affect creditors. The documents governing the company's senior secured term loan gives Kodiak the ability to incur incremental indebtedness with a free and clear basket of the greater of $133 million, 100% of LTM consolidated EBITDA, plus additional amounts so long as: first lien net leverage ratio does not exceed 4.00x (for pari passu indebtedness); secured net leverage ratio does not exceed 6.00x (for junior secured indebtedness); and total net leverage ratio does not exceed 6.00x (for unsecured indebtedness). Alternatively, the ratio tests can all be satisfied so long as leverage does not increase on a pro forma basis if incurred in connection with a permitted acquisition or investment. Collateral leakage is permitted through the transfer of assets to unrestricted subsidiaries, subject to carve-out capacity; there are no additional "blocker" protections restricting such transfers. Only wholly-owned material subsidiaries must provide guarantees, raising the risk of potential guarantee release; partial dividends of ownership interests could jeopardize guarantees. Kodiak's obligation to prepay loans with the net proceeds of asset sales steps down to 50% and 25% at 3.50x and 3.00x first lien net leverage ratio, respectively.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFactors that could lead to an upgrade:» Debt-to-LTM EBITDA sustained below 4.0x» Preservation of its good liquidityFactors that could lead to a downgrade:» EBITA-to-interest expense trending towards 1.5x» Debt-to-LTM EBITDA remains above 5.0x» The company's liquidity profile deteriorates» Aggressive acquisition or shareholder initiativesKodiak Building Partners Inc, headquartered in Littleton, Colorado, is a national distributor of building materials and provider of construction services. Court Square Capital Partners, through its affiliates, has a majority ownership in Kodiak and management has a minority interest.The principal methodology used in these ratings was Distribution & Supply Chain Services Industry published in June 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1121974. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Peter Doyle Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Dean Diaz Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​