Approximately $4 billion of debt rated
New York, February 14, 2013 -- Moody's Investors Service, ("Moody's) assigned
a B1 rating to Realogy Group LLC's, ("Realogy")
proposed new $1.8 billion senior secured term loan facility
and $600 million senior secured revolving credit facility,
revised the ratings outlook to positive from stable and raised the Speculative
Grade Liquidity Rating to SGL-2 from SGL-3. All other
existing ratings were affirmed.
RATINGS RATIONALE
The positive ratings outlook reflects Moody's expectation for continued
debt repayments driven by annual free cash flow of over $300 million,
as well as the potential that Realogy outperforms Moody's expectation
for 4% to 5% revenue growth. If Realogy does outperform,
EBITDA could be considerably higher than the $800 million level
Moody's expects because of the operating leverage in Realogy's
business model, and would drive more rapid than anticipated financial
deleveraging. However, Moody's notes that current Debt
to EBITDA of over 7 times remains elevated for the B3 rating category.
The upgrade to a Speculative Grade Liquidity Rating of SGL-2 reflects
the $50 million of additional internal liquidity sources from the
reduction in interest expense and higher than expected 4th quarter cash
balance, as well as materially improved external liquidity from
the proposed $600 million revolver, which is substantially
larger than the existing $363 million facility.
The ratings could be upgraded if Moody's expects debt to EBITDA to be
sustained at well less than 6 times and free cash flow to debt to be above
5%, respectively. The outlook can be stabilized if
the company fails to generate enough free cash flow to reduce debt to
EBITDA towards 6 times by the end of 2013 or uses free cash flow to return
cash to shareholders. The ratings could be lowered if weaker than
expected existing home sale market conditions results in declining revenues,
profitability or free cash flow, or if Realogy does not continue
to make steady progress to reduce financial leverage towards levels consistent
with other companies at the B3 rating level. A downgrade could
occur if Moody's comes to expect debt to EBITDA to be sustained at about
7.0 times and free cash flow to debt to remain near 0%.
The following ratings were assigned:
Senior Secured Revolving Credit Facility; B1 (LGD2, 26%)
Senior Secured Term Loan Facility, B1 (LGD2, 26%)
The following rating was upgraded:
Speculative grade liquidity, to SGL-2 from SGL-3
The following ratings were affirmed (point estimates revised):
Corporate Family, B3
Probability of Default, B3-PD
Senior Secured Letter of Credit Facilities, B1 (LGD2, 26%)
Senior secured first lien notes due 2020, B1 (to LGD2, 26%)
Senior secured notes (one and half lien) due 2020, Caa1 (to LGD5,
72%)
Senior secured (one and half lien) notes due 2019, Caa1 (to LGD5,
72%)
11.5% senior unsecured notes due 2017, Caa2 (to LGD5,
89%)
12% senior unsecured notes due 2017, Caa2 (to LGD5,
88%)
12.375% senior subordinated notes due 2015 to Caa2 (LGD6,
95%)
Realogy Group LLC (Realogy), is a global provider of real estate
and relocation services, mostly in the US. The company operates
in four segments: real estate franchise services, company
owned real estate brokerage services, relocation services and title
and settlement services.
The principal methodology used in this rating was the Global Business
and Consumer Service Industry Methodology published in October 2010.
Other methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Edmond DeForest
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert P Jankowitz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Rates Realogy's New Secured Debt B1, Outlook to Positive, Affirms B3 CFR