Research Update: Project Castle Inc. (Material Handling Systems) Rated 'B-' On Debt-Funded Combination With Fortna Inc.; Outlook Stable

Project Castle Inc., the acquisition vehicle established to acquire and combine Thomas H. Lee Partners' (THL's) portfolio companies Deliver Buyer Inc. (Material Handling Systems Inc.; MHS) and Fortna Inc., plans to issue a new $225 million revolving credit facility and $1.425 billion term loan to fund the $3.9 billion acquisition price of MHS and Fortna Inc. The company will also use funds from $1.2 billion in new cash equity from Abu Dhabi Investment Authority and $1.416 billion in rollover equity from THL and management to finance the acquisition and pay for transaction-related fees and expenses. Although the combined businesses will benefit from greater scale and improved customer diversity, we forecast Project Castle's S&P adjusted leverage, pro forma for a full

...- Project Castle Inc., the acquisition vehicle established to acquire and combine Thomas H. Lee Partners' (THL's) portfolio companies Deliver Buyer Inc. (Material Handling Systems Inc.; MHS) and Fortna Inc., plans to issue a new $225 million revolving credit facility and $1.425 billion term loan to fund the $3.9 billion acquisition price of MHS and Fortna Inc. - The company will also use funds from $1.2 billion in new cash equity from Abu Dhabi Investment Authority and $1.416 billion in rollover equity from THL and management to finance the acquisition and pay for transaction-related fees and expenses. - Although the combined businesses will benefit from greater scale and improved customer diversity, we forecast Project Castle's S&P adjusted leverage, pro forma for a full year of operations of MHS and Fortna, to remain high, with year-end 2022 leverage of about 7x. - We therefore assigned our 'B-' issuer credit rating to Project Castle. - At the same time, we assigned our 'B-' issue level...

Research Update