Reuters: Market News: TEXT-S&P summary: KAR Auction Services Inc.

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TEXT-S&P summary: KAR Auction Services Inc. Apr 6th 2012, 12:58 Fri Apr 6, 2012 8:58am EDT Apr 06 - =============================================================================== Summary analysis -- KAR Auction Services Inc. --------------------- 06-Apr-2012 =============================================================================== CREDIT RATING: B+/Stable/-- Country: United States State/Province: Illinois Primary SIC: Automotive services, nec Mult. CUSIP6: 48238N Mult. CUSIP6: 48238Q Mult. CUSIP6: 48562R =============================================================================== Credit Rating History: Local currency Foreign currency 09-Mar-2011 B+/-- B+/-- 07-Jan-2010 B/-- B/-- =============================================================================== Rationale The ratings on Carmel, Ind.-based vehicle auction company KAR Auction Services Inc. reflect its aggressive financial risk profile, with high leverage and weak EBITDA interest coverage. The business risk profile is fair, reflecting its established position in the competitive whole-car and salvage auction markets, demonstrated profitability with around 32% adjusted EBITDA margin (by Standard & Poor's Ratings Services' calculation), and return on capital of 10% for 2011. We assume KAR will continue using cash flow mainly for permanent debt reduction, but also for moderate-size acquisitions to expand market share as opportunities arise. We believe the competitive dynamic between the traditional physical and online auctions is evolving, and our rating assumes KAR will adequately manage any shifts through its various product offerings. KAR's private equity owners--Kelso & Co., Goldman Sachs Capital Partners, ValueAct Capital LLC, and Parthenon Capital (all unrated)--control about 80% of the common shares; the rest are publicly held. The current senior management team has a track record of successfully improving operating efficiencies and integrating acquisitions in recent years. Link this Share this Digg this Email Reprints

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