September 22, 2023

Truck parts supplier FleetPride holds on to speculative debt ratings


FleetPride, a private equity-owned major supplier of aftermarket truck parts, held on to its speculative debt rating in a review by both Moody’s Investors Service and S&P Global Ratings.

FleetPride, which is owned by American Securities LLC, is restructuring existing debt to a longer maturity and taking on new financing to create a total debt offering of $870 million, according to Moody’s. It expects to repay existing asset-based lending taken on under a revolving credit line. 

Moody’s (NYSE: MCO) assigned a rating of B3 to the new issue. That is unchanged from the B3 ratings assigned to the debt that is being retired. Moody’s says ratings in the B category are “considered speculative and are subject to high credit risk.” 

At S&P Global, a B- rating on one debt issue and a CCC on a second debt issue were unchanged. Ratings in the B group at S&P are issued to companies that are “more vulnerable to nonpayment than obligations rated ‘BB,’ but the obligor currently has the capacity to meet its financial commitments on the obligation,” S&P says in its definitions. 

The B3 rating of Moody’s and the B- rating at S&P are considered equivalent. The CCC rating on the one debt series issued by S&P Global is just a few notches up from the lowest rating the company issues. 

However, the reports issued by the ratings agencies in conjunction with their actions on FleetPride did not suggest any greater concern with the company’s finances than they previously held and both agencies were mostly positive about the restructuring. 

“We view the transaction as positive, enhancing liquidity and reducing refinancing risk,” S&P Global wrote in its report. Maturities on the first-line term loan are now pushed out until September 2028, two and a half years longer than the current maturity date. 

Its asset-based loan facility does not have a maturity until November 2025, S&P said.

S&P Global (NYSE: SPGI) also had positive statements on FleetPride’s operational future. It said the parts supplier has implemented a “revised pricing strategy” in recent years “and successfully repriced most of its stock-keeping units, passing along higher raw material inputs to customers.” 

Its e-commerce channel is expected to grow as a sales strategy, S&P Global said, and FleetPride is expected to pursue “tuck-in acquisitions to expand its aftermarket parts and service business.”

According to the FleetPride website, it has made seven acquisitions in 2023. 

Although some of the comments are positive, Moody’s noted that its rating “reflects … high financial leverage under private equity ownership, exposure to cyclical end markets and adequate liquidity with a history of increasing usage under its credit facility.”

But the positives in FleetPride’s “credit profile,” Moody’s said, are “its size and scale, operating as the largest independent distributor of non-discretionary aftermarket parts for the heavy-duty truck market.” 

Although no details about the level of FleetPride’s sales or profitability were disclosed (which is normal procedure), Moody’s said the company has an “improving operating margin.” 

Moody’s added that it expects FleetPride’s revenue to grow “high single digits” next year, with its EBITDA margin to increase “slightly.”

Aftermarket truck providers sell and distribute parts into the market for repairs and maintenance as opposed to into vehicle manufacturers. 

Moody’s gave FleetPride a “stable” outlook, which means an upward or downward move in its debt rating is not likely. The stable outlook “reflects our expectation for FleetPride to continue to grow market share,” Moody’s said, adding that it expects the company’s debt/EBITDA margins will continue to be near 6x.

A spokeswoman for FleetPride declined comment.

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The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.

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