Approximately $6.8 billion of rated debt instruments affected
New York, May 07, 2013 -- Moody's Investors Service changed Nielsen Holdings N.V.'s
(Nielsen) rating outlook to positive from stable following the company's
announcement that it signed a definitive agreement to sell its Expositions
trade show business to Onex Corporation for $950 million.
Nielsen plans to utilize the net proceeds to mitigate about 70%
of the borrowing needs related to its pending $1.3 billion
Arbitron Inc. (Arbitron) acquisition. The rating outlook
change to positive reflects that de-leveraging resulting from the
Expositions business sale, projected earnings growth and additional
debt repayment have the potential to reduce Nielsen's debt-to-EBITDA
leverage (approximately 4.7x LTM 3/31/13 incorporating Moody's
standard adjustments and pro forma for the Arbitron acquisition and Expositions
sale) to a level approaching 4x by the end of 2014. This is a leverage
range Moody's previously indicated could position the company for
an upgrade. Moody's also affirmed Nielsen's Ba3 Corporate
Family Rating (CFR) and assigned a SGL-3 speculative-grade
liquidity rating.
Nielsen's trade show business has a high margin and growth prospects
in a recovering economy, but is vulnerable to shifts in exhibitor
spending that made the business much more cyclical than Nielsen's
remaining operations. Moody's believes Arbitron is a better
strategic fit for Nielsen with cost and revenue opportunities with the
company's Watch segment. The incremental earnings and strategic
opportunities from Arbitron, and the capability to help fund and
limit the net increase in debt-to-EBITDA leverage on the
Arbitron acquisition to roughly 0.1x more than offset the modest
loss of earnings (approximately 3% of revenue and 6% of
EBITDA, prior to corporate overhead for LTM 3/31/13) from the Expositions
sale.
Affirmations:
..Issuer: Nielsen Holdings N.V.
....Corporate Family Rating, Affirmed
Ba3
....Probability of Default Rating, Affirmed
Ba3-PD
..Issuer: Nielsen Finance LLC
....Senior Secured Bank Credit Facility (Revolver)
due Apr 1, 2016, Affirmed Ba2, LGD3 - 31%
....Senior Secured Bank Credit Facility (Class
D Term Loan) due Feb 2, 2017, Affirmed Ba2, LGD3 -
31%
....Senior Secured Bank Credit Facility (Class
E Term Loan) due May 1, 2016, Affirmed Ba2, LGD3 -
31%
....Senior Secured Bank Credit Facility (Class
E Euro Term Loan) due May 1, 2016, Affirmed Ba2, LGD3
- 31%
....Senior Unsecured Regular Bond/Debenture
due Feb 1, 2014, Affirmed B2, LGD5 - 85%
....Senior Unsecured Regular Bond/Debenture
due Oct 15, 2018, Affirmed B2, LGD5 - 85%
....Senior Unsecured Regular Bond/Debenture
due Oct 1, 2020, Affirmed B2, LGD5 - 85%
Assignments:
..Issuer: Nielsen Holdings N.V.
.... Speculative Grade Liquidity Rating,
Assigned SGL-3
Outlook Actions:
..Issuer: Nielsen Holdings N.V.
....Outlook, Changed To Positive From
Stable
..Issuer: Nielsen Finance LLC
....Outlook, Changed To Positive From
Stable
RATINGS RATIONALE
Nielsen's Ba3 CFR reflects Moody's view that the company maintains
strong international business positions in the measurement and analysis
of consumer purchasing behavior and media and marketing information that
is protected by high entry barriers. Revenue is generated from
long-standing contractual relationships with consumer product companies,
media and advertisers, and benefits from the company's status
as a source of independent benchmark information. The effect of
cyclical spending shifts by clients is dampened by the importance of the
information and analysis Nielsen provides, and revenue tends to
hold up well in periods of economic stress. Increasing competition
and changes in consumer buying habits and advertising/marketing delivery
channels due to technology advancements are a risk with the pace of change
likely to accelerate. However, Moody's believes Nielsen
is well-positioned to broaden the coverage of its product and service
offerings to encompass new media channels.
Moody's expects Nielsen can manage costs and build on its track
record to deliver continued solid revenue performance and steady profit
growth despite a challenging operating environment in its "Buy"
division. The exit strategy of the consortium of private equity
investors (holding approximately 52% of the shares and five of
the 11 board seats) that led the 2006 leveraged-buyout as well
as the proclivity of such investors to utilize debt and cash flow to fund
shareholder distributions creates event risk. To that end,
Nielsen's initiation of a $0.16 per share quarterly
dividend in 2013's first quarter (roughly 33% payout of CFO
less capex) is aggressive and will consume cash that could otherwise be
used to reduce debt or for acquisitions. However, Nielsen's
goal of achieving an investment-grade credit profile suggests the
company will manage shareholder distributions including the dividend in
a manner that allows for continued leverage reduction. Moody's
believes Nielsen's cash flow generation provides capacity to make
steady de-leveraging progress and projects the company will reduce
debt-to-EBITDA leverage to a low 4x range by the end of
2014.
Nielsen's SGL-3 speculative-grade liquidity rating
reflects the company's adequate liquidity position to fund the remaining
portion of the Arbitron acquisition not covered by net proceeds from the
Expositions business sale. The company's existing cash ($233
million as of 3/31/13), $300-$350 million of
free cash flow (after dividends) projected by Moody's, $567
million of unused capacity (net of drawdowns and letters of credit) on
the $635 million revolver expiring April 2016, and the $925
million expected net proceeds from the Expositions sale provide modest
coverage of the $1.3 billion Arbitron acquisition,
approximately $90 million of required term loan amortization over
the next 12 months, and the $214.5 million February
2014 note maturity, factoring in cash flow seasonality.
Nielsen has financing commitments in place to cover the Arbitron purchase
price. Because the commitments are subject to customary closing
conditions, such financing is not factored into the SGL analysis.
However, Moody's expects to upgrade the liquidity rating to
SGL-2 from SGL-3 once permanent Arbitron financing is put
in place or the commitment is funded. The commitment is available
on a senior unsecured basis and pari passu with the company's existing
senior unsecured debt.
The positive rating outlook reflects Moody's expectation that Nielsen
will deliver operating results broadly in line with its 2013 guidance
(4-5% revenue growth and 40-60 basis points EBITDA
margin improvement) and that shareholder distributions and acquisitions
are managed such that the company remains on a deleveraging trajectory.
Moody's assumes in the rating outlook that the U.S.
and global economies continue to expand modestly.
Downward rating pressure could occur if debt-to-EBITDA leverage
were to exceed 5.0x or free cash flow generation weakens through
deterioration in operating performance, significant acquisitions,
or shareholder distributions. The ratings could be downgraded or
the outlook changed to stable if Nielsen adopts more aggressive financial
policies including a move away from its intention to continue de-leveraging
and stated goal of achieving an investment-grade credit profile.
A deterioration of liquidity could also create downward rating pressure.
An upgrade would require steady and growing earnings performance paired
with de-leveraging such that debt-to-EBITDA is moving
towards 4.0x and free cash flow generation is meaningful on a sustained
basis. Moody's would need to be comfortable that Nielsen
has the willingness and capacity to manage to these tighter credit metrics
after incorporating potential future transactions such as the eventual
exit of its private equity holders. Nielsen would also need to
maintain a good liquidity position including an expectation by Moody's
that significant maturities from 2016-2018 can be managed within
free cash flow generation and likely refinancing actions.
Please see the credit opinion posted to www.moodys.com for
additional information on Nielsen's ratings.
The principal methodology used in rating Nielsen was the Global Business
& Consumer Service Industry Rating 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.
Nielsen, headquartered in Diemen, The Netherlands and New
York, NY, is a global provider of consumer information and
measurement services that operates in approximately 100 countries.
Nielsen's Buy segment (61% of FY 2012 revenue) consists of
two operating units: (i) `Information', which includes retail
measurement and consumer panel services; and (ii) `Insights',
which provides analytical services for clients. The Watch segment
(36% of revenue) provides viewership data and analytics across
television, online and mobile devices for the media and advertising
industries. The company announced the sale of its Expositions segment
(3% of revenue; an operator of largely US-based trade
show, event and conference activities) for $950 million in
May 2013. Revenue for the 12 months ended March 2013 was approximately
$5.9 billion excluding Expositions and including Arbitron.
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.
John E. Puchalla
VP - Senior Credit Officer
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
John Diaz
MD - Corporate Finance
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 changes Nielsen's rating outlook to positive from stable; affirms Ba3 CFR
