Research Update: LCM Investments Holdings II LLC 'BB-' Rating Affirmed, Unsecured Debt Downgraded To 'B+', New Debt Rated; Outlook Stable

LCM Investments Holdings II LLC (d/b/a Morgan Automotive Group) plans to issue $500 million of senior unsecured notes to recapitalize its balance sheet. We affirmed our 'BB-' issuer credit rating on Morgan Auto and assigned a 'B+' issue-level rating and '5' recovery rating (10%-30%; rounded estimate: 15%) to the pari passu senior unsecured note tranche due in 2031. We lowered our rating on its senior unsecured debt to 'B+' from 'BB-' because of the higher debt quantum in our hypothetical default scenario and revised the recovery rating to '5' from '4', reflecting our view of modest (10%-30%; rounded estimate: 15%) recovery prospects. The stable outlook reflects our expectation that Morgan Auto will continue to generate good cash flow, above average

...- LCM Investments Holdings II LLC (d/b/a Morgan Automotive Group) plans to issue $500 million of senior unsecured notes to recapitalize its balance sheet. - We affirmed our '##-' issuer credit rating on Morgan Auto and assigned a 'B+' issue-level rating and '5' recovery rating (10%-30%; rounded estimate: 15%) to the pari passu senior unsecured note tranche due in 2031. - We lowered our rating on its senior unsecured debt to 'B+' from '##-' because of the higher debt quantum in our hypothetical default scenario and revised the recovery rating to '5' from '4', reflecting our view of modest (10%-30%; rounded estimate: 15%) recovery prospects. - The stable outlook reflects our expectation that Morgan Auto will continue to generate good cash flow, above average adjusted EBITDA margins, and debt to EBITDA below 4x, albeit elevated in 2023 because of the recapitalization and cash no longer netted due to our financial sponsor treatment....

Research Update