Research Update: LKQ Corp. 'BB' Corporate Credit Rating Affirmed On Plans To Acquire Stahlgruber, Outlook Stable; Proposed Debt Rated

Chicago-based replacement auto parts provider LKQ Corp. plans to acquire Stahlgruber GmbH, a leading wholesale distributor of aftermarket auto parts in Europe, for an enterprise value of approximately €1.5 billion. To finance the transaction, LKQ intends to draw on its amended revolving credit facility and issue €1 billion of senior unsecured notes and over 8 million new shares of its common stock (valued at about $317 million). Therefore, we are affirming our 'BB' corporate credit rating on LKQ. At the same time, we are assigning our 'BB' issue-level rating and '3' recovery rating to the proposed €1 billion senior unsecured notes. The stable outlook reflects our belief that management will pace the company's future acquisitions such that it maintains debt

...+ Chicago-based replacement auto parts provider LKQ Corp. plans to acquire Stahlgruber GmbH, a leading wholesale distributor of aftermarket auto parts in Europe, for an enterprise value of approximately 1.5 billion. + To finance the transaction, LKQ intends to draw on its amended revolving credit facility and issue 1 billion of senior unsecured notes and over 8 million new shares of its common stock (valued at about $317 million). + Therefore, we are affirming our '##' corporate credit rating on LKQ. + At the same time, we are assigning our '##' issue-level rating and '3' recovery rating to the proposed 1 billion senior unsecured notes. + The stable outlook reflects our belief that management will pace the company's future acquisitions such that it maintains debt leverage of less than 4.0x and a free operating cash flow (FOCF)-to-debt ratio of more than 10% over the next 12 months....

Research Update