Investing.com -- Moody’s Ratings has upgraded the corporate family rating (CFR) of RB Global Inc. to Ba1 from Ba2. The probability of default rating has also been raised to Ba1-PD from Ba2-PD. Additionally, the senior secured ratings on RB Global’s bank credit facilities have been upgraded to Ba1 from Ba2.
The ratings of Ritchie Bros (NYSE: RBA ). Holdings Inc., whose notes are guaranteed by RB Global, have also been upgraded. The backed senior secured rating is now Ba1, up from Ba2, and the backed senior unsecured rating has been raised to Ba2 from B1. The speculative grade liquidity rating (SGL) of RB Global remains at SGL-2. The rating outlook for both RB Global and Ritchie Bros. Holdings has been changed to stable from positive.
Moody’s analyst Jamie Koutsoukis stated that the upgrade reflects RB Global’s successful deleveraging, which has been achieved through both absolute debt reduction and increased earnings. It also indicates that the company has benefited from the acquisition of IAA, Inc. in 2023. This acquisition has led to improved margins and greater business diversification.
RB Global’s Ba1 CFR benefits from its strong position in the industrial equipment auctions and auto salvage auction market. It also gains from its multichannel strategy with strong online platforms, consistent history of generating free cash flow, and exposure to multiple industry sectors with good growth potential. However, the rating is constrained by the company’s active pursuit of acquisitions and willingness to undertake debt funded transactions.
RB Global’s business in the commercial construction and transportation segment has demonstrated its capacity to generate free cash flow during downturns, despite the uncertain economic environment. The auto salvage business remains a-cyclical with a generally growing market attributed to the complexity, cost, and rising repair expenses of cars, which positively influence scrap rates.
RB Global has good liquidity (SGL-2) through to the end of June 2026, with sources of liquidity of around $1.8 billion compared to uses of around $290 million. The company also announced in March that it entered into an agreement to purchase J.M. Wood Auction Co., Inc. for $235 million plus the cost value of the assets currently held for auction.
The senior ranking security position of the senior secured revolver, term loan and notes, which account for the majority of the company’s capital structure, are rated Ba1, in line with the company’s Ba1 CFR. The unsecured debt, rated Ba2, rank behind the secured debt and are therefore rated one notch below the corporate family rating.
The stable outlook reflects the expectation that RB Global will continue to focus on debt reduction. Moreover, with organic revenue growth and some margin expansion, adjusted debt to EBITDA is expected to remain below 3x.
The ratings could be upgraded if the company continues to increase its scale and diversity and maintain very good liquidity. Alternatively, the ratings could be downgraded if business fundamentals deteriorate, or if debt to EBITDA is sustained above 3.0x.
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