Rent-A-Center's new $650 million credit is not rated one notch above its senior implied rating of Ba2 because of its modest tangible asset coverage. Although the deal is adequately secured, the coverage is low compared to the rent-to-own store chain's total and secured debt, explained Marie Menendez, v.p. and senior credit officer at Moody's Investors Service. Moody's notes the company's secured debt levels continue to increase as a proportion of total debt, which eliminates the benefit from growth in tangible assets or enterprise value. Out of the company's $1.7 billion in assets, about $800 million is in goodwill, explained Robert Davis, Rent-A-Center's v.p. of finance, cfo and treasurer. He noted that the company viewed the ratings as positive. The deal is rated Ba2 and includes a five-year, $120 million revolver, a six-year, $450 million term loan and an $80 million synthetic term loan.
May 04, 2003
