- Buyout firm paid about $450 million
- Moody’s praises market position
- EBITDA/interest coverage about 2x
The Los Angeles buyout firm closed its acquisition of Tucson, Arizona-based Mister Car Wash on Aug. 21 with seller ONCAP, the mid-market arm of Onex Corp, in a deal valued at a reported $400 million to $500 million. With 134 car washes and 32 lube centers, Mister Car Wash ranks as the largest operator of car washes in North America, the company said.
Moody’s initiated ratings for $210 million of debt for Mister Car Wash, part of an overall capital structure of roughly 50/50 debt and new cash common equity contributed by Leonard Green, according to Charles O’Shea, senior analyst.
The New York-based ratings agency said projected debt/EBITDA for Mister Car Wash amounts to the mid-7x range, “somewhat mitigated” by an EBITDA/interest ratio of around 2x.
“We expect this leverage to decline over the next 12-18 months as the company uses its free cash flow to repay debt,” Moody’s said in a note to clients. “Ratings also consider the company’s market position, which despite its limited scope in a large and highly fragmented market, we consider to be an asset given its strength in its chosen markets, as well as its excellent operating ability that results in very solid margins.”
The debt rating agency assigned Mister Car Wash a corporate family rating of B2, a classification for obligations considered speculative and subject to high credit risk. Moody’s rated the company’s proposed $30 million secured revolving credit facility and a proposed $180 million secured term loan B as Ba3, defined as speculative in nature and not investment grade but toward the more stable end of the junk-bond spectrum.
Ratings may be upgraded if debt/EBITDA moves nearer to 5.5x and EBITDA/interest remains above 2x, Moody’s said.
Leonard Green invested in Mister Car Wash from its sixth fund, Green Equity Investors VI LP, which closed at its hard cap of $6 billion in 2012.
ONCAP acquired Mister Car Wash in 2007.