Recovery for lenders on Mobile Storage Group's new $200 million credit would be inadequate in a default scenario where the collateral declines and the line is fully drawn, according to Standard & Poor's. The ratings agency has assigned a BB rating to the credit, which comprises a $60 million, five-year revolver and a $140 million, seven-year term loan and was launched by Credit Suisse First Boston andLehman Brothers on May 3.
Portable storage is a relatively small niche segment of the self-storage business and as one of the largest participants, Mobile Storage weighs in with a 5% market share. The company has grown in the last several years, but mainly through debt financed acquisitions that have weakened its credit ratios, said S&P. Mobile Services Group, Mobile Storage's parent company and operating entity, is expected to complete an initial public offering shortly. The proceeds from this offering will be directed to paying down the company's debt and will improve the debt to capital ratio from 80% to 50%.
Mobile Storage's ratings are supported by the company's 75,000 customers encompassing a broad range of industries from construction contractors to retail chains. It has also had a history of generating strong and stable cash flow under economic times of distress and earnings and cash flow are expected to increase. Calls to James Robertson, Mobile Service's executive v.p. and interim cfo, were not returned by press time.