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LSF9 Atlantis Holdings, LLC -- Moody's affirms Victra's B2 CFR

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Rating Action: Moody's affirms Victra's B2 CFRGlobal Credit Research - 11 Mar 2022New York, March 11, 2022 -- Moody's Investors Service (“Moody's”) affirmed LSF9 Atlantis Holdings, LLC's (dba "Victra") B2 corporate family rating (CFR), B2-PD probability of default rating (PDR) and B2 senior secured notes rating. At the same time Moody's assigned a B2 rating to the proposed $600 million first lien term loan. The outlook remains stable. The net proceeds will be used to complete the acquisition of Go Wireless, Inc. ("Go Wireless"). Moody's ratings and outlook are subject to receipt and review of final documentation. The ratings at Go Wireless Holdings, Inc. (B2 stable) will be withdrawn upon closing of the transaction and repayment of its existing debt instruments.The B2 CFR affirmation reflects governance considerations including its maintenance of moderate leverage post the completion of the acquisition of Go Wireless Inc. Although the transaction increases Victra's leverage from 4.8x to 5.4x on a pro forma basis for the twelve months ended September 30, 2021, Moody's expects it to reduce below 5x within the next year as it realizes cost saving synergies from overlapping store closures, corporate headcount reduction and sourcing. The combined business enhances the mutually-beneficial and symbiotic relationship between Victra and Verizon and further cements Victra's position as the largest Verizon independent retailer as it expects to operate over 1,300 stores following the closure of overlapping stores.Assignments:..Issuer: LSF9 Atlantis Holdings, LLC....Senior Secured First Lien Term Loan, Assigned B2 (LGD3)Affirmations:..Issuer: LSF9 Atlantis Holdings, LLC.... Corporate Family Rating, Affirmed B2.... Probability of Default Rating, Affirmed B2-PD....Senior Secured Regular Bond/Debenture, Affirmed B2 (LGD3)Outlook Actions:..Issuer: LSF9 Atlantis Holdings, LLC....Outlook, Remains StableRATINGS RATIONALEVictra's B2 corporate family rating (CFR) reflects its reliance on cellphone manufacturers for continued product innovation and the risk of volatile customer demand related to new product introductions. The rating is also constrained by the risk of lengthening customer replacement/upgrade cycle and declines in wireless activations. Victra benefits from its symbiotic relationship with Verizon Communications Inc. (Verizon, Baa1 stable) as its largest independent retailer, the nondiscretionary nature of cell phones, and beneficial relationships with the handset manufacturers. The rating also reflects Victra's good liquidity.The stable outlook reflects Victra's market position as Verizon's largest independent retailer and its good liquidity as well as Moody's expectation that free cash flow will be utilized for reinvestment or debt repayment. The stable outlook also assumes successful integration of Go Wireless.As proposed, the new first lien credit facility is expected to provide covenant flexibility that if utilized could negatively impact creditors. Notable terms include the following:- Incremental debt capacity up to the greater of $338 million and 100% of Consolidated EBITDA, plus unlimited amounts subject to a first lien net leverage ratio of 4.5x for pari passu first lien debt. Amounts up to the greater of $338 million and 100% of Consolidated EBITDA or amounts incurred with respect to a Limited Condition Acquisition may be incurred with an earlier maturity date than the initial term loan.- There are no express “blocker” provisions which prohibit the transfer of specified assets to unrestricted subsidiaries; such transfers are permitted subject to carve-out capacity and other conditions.- Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases.- There are no express protective provisions prohibiting an up-tiering transaction.The above are proposed terms and the final terms of the credit agreement may be materially different.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if Victra maintains a conservative financial strategy towards shareholder returns and future acquisitions, while improving operating performance. An upgrade would also require successful integration of the Go Wireless acquisition. Quantitatively, ratings could be upgraded if debt/EBITDA is sustained below 4.5x and EBITA/Interest is sustained above 2.0x.Ratings could be downgraded if the company fails to successfully integrate the Go Wireless acquisition, liquidity were to weaken, or if financial strategies become more aggressive. Ratings could also be downgraded if deteriorating operating performance resulted in debt/EBITDA above 5.5x or EBITA/Interest approaching 1.25x.LFS9 Atlantis Holdings, LLC and subsidiaries, operating under the Victra brand name, is the largest Verizon independent retailer. Following the acquisition of Go Wireless the combined company will operate over 1,300 stores throughout the United States. The company is owned by a consortium of investors including the company founder and current CEO, Rich Balot, and an affiliate of the Dhanani Group. Combined company revenue for the last twelve-month period ended September 30, 2021 was approximately $2.8 billion.The principal methodology used in these ratings was Retail published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1296095. 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.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. Joe Tringali 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 Margaret Taylor 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 © 2022 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. 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