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Investing.com -- Moody’s Ratings has affirmed ADT Inc.’s corporate family rating at Ba3 while downgrading its senior secured first-lien ratings from Ba2 to Ba3, maintaining a positive outlook for the security monitoring giant.
The rating action follows ADT’s announcement of a $300 million add-on to its existing senior secured first-lien term loan due 2032. The company plans to use these proceeds, along with approximately $1 billion of additional senior secured first-lien debt to be issued later, to fully repay its existing senior secured second-lien notes due 2028.
The downgrade of the first-lien ratings reflects the elimination of first loss support that second-lien debt previously provided to first-lien creditors in default scenarios. However, Moody’s affirmed the Ba3 corporate family rating due to the leverage-neutral nature of the refinancing.
Moody’s expects ADT to use excess cash to repay the remaining $300 million of its 2026 notes by April 2026, which could help lower the company’s debt to recurring monthly revenue (RMR) ratio to approximately 20x in 2026.
As the largest residential alarm-monitoring provider in the U.S., ADT benefits from a predictable revenue stream through multi-year monitoring contracts. The company’s partnerships with Google Inc. and State Farm Life Insurance Company, who are also minority shareholders, support product development and help reduce subscriber acquisition costs.
ADT’s liquidity remains good, with approximately $45 million in unrestricted cash as of June 30, expected annual free cash flow exceeding $550 million, and full access to an $800 million revolving credit facility due October 2029.
The positive outlook reflects Moody’s expectation that ADT’s operating and credit metrics will continue to improve over the next 12-18 months as the company focuses more on debt reduction rather than shareholder returns or debt-financed acquisitions.
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