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Rating Action:

Moody's Affirms Vertiv Intermediate's Ratings

Global Credit Research - 18 May 2017

Note: On May 25, 2017, the press release was corrected as follows: In the second line of the debt list for Vertiv Group Corporation, the LGD for the $2.245 billion Term Loan B was changed to LGD 2 from LGD 3. Revised release follows.

New York, May 18, 2017 -- Moody's Investors Service ("Moody's") affirmed the B2 corporate family rating and B2-PD probability of default rating and stable outlook at Vertiv Intermediate Holding Corporation ("Vertiv"). Simultaneously, Moody's also affirmed the Caa1 rating on Vertiv's $500 million PIK Notes (PIK Note). Additionally, Cortes NP Acquisition Corporation changed its name to Vertiv Group Corporation. Moody's affirmed the B3 rating on the $750 million Sr Notes and maintained the stable outlook at Vertiv Group Corporation. Also, as a result of a repricing and CUSIP change, we are withdrawing the Ba3 rating on the old CUSIP and assigning a Ba3 rating on the new CUSIP for the $2.245 billion term loan B.

Moody's affirmed the following ratings at Vertiv Intermediate Holding Corporation:

Corporate Family Rating, at B2;

Probability of Default Rating, at B2-PD;

PIK Notes, at Caa1, LGD6.

The rating outlook remains stable.

The following Vertiv Group Corporation actions have been taken:

$750m Sr Notes affirmed at B3, LGD5

$2.245 billion Term Loan B assigned Ba3, LGD2

$2.320 billion Term Loan B, withdrawn, previously rated Ba3, LGD3

The rating outlook remains stable.

RATINGS RATIONALE

The affirmation of the B2 CFR at Vertiv reflects our expectations for improving leverage in 2018, positive free cash flow generation, and a strong liquidity profile, weighed against a high leverage level and slow profit growth anticipated through year end 2017. With positive cash flow generation and modest earnings growth, we expect Debt / EBITDA to decline towards 6x by end of fiscal year 2018. Although the recent issuance of a PIK Note to fund a large dividend suggests an aggressive financial policy, we do not anticipate another dividend in 2017.

Vertiv's liquidity profile is good. It is supported by a $400 million asset-based revolving credit facility (unrated) and good free cash flow generation. In addition, the company has meaningful unpledged foreign assets that could be monetized, if needed. The ABL facility maintains a springing fixed charge coverage ratio of 1.0 times when revolver availability falls below approximately $40 million. We believe that it will not be tested in the near term. The term loan does not have any financial covenants.

The Ba3 rating on Vertiv Group Corporation's approximately $2.3 billion term loan reflects the security package of assets and the support provided by unsecured obligations. Moreover, the $400 million ABL revolver has a superior position in claims on the company's choice assets. We consider this significant as the company's balance sheet is comprised of a substantial amount of goodwill and other intangibles. There is a considerable amount of unsecured debt that will take the first loss under a distressed scenario. The B3 senior unsecured rating reflects its subordinated position to both the ABL revolver and term loan. The senior unsecured PIK toggle notes are rated Caa1. These notes were issued out of Vertiv Intermediate Holding Corporation, a legal holding company. The Caa1 rating on the PIK notes, two notches below the CFR, reflects their position as the most structurally junior debt in the capital structure and which would be in a first loss position in the event of a default scenario.

The stable rating outlook reflects Moody's view that positive free cash flow and deleveraging will be slow.

The ratings could be downgraded if Moody's expects debt / EBITDA to be sustained above 6 times, or EBITDA to Interest is below 2 times, particularly if free cash flow was anticipated to be negative. A contraction in EBITDA margins of over 100 basis points could lead to a downgrade.

The ratings could be upgraded if Moody's expects debt / EBITDA below 5 times on a sustainable basis with improving EBITDA margins.

The principal methodology used in these ratings was Global Manufacturing Companies published in July 2014. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Vertiv Intermediate Holding Corporation, headquartered in Columbus, Ohio, provides various infrastructure technologies and equipment for power and thermal management and infrastructure monitoring services used in data centers, communication networks, and commercial and industrial environments. Vertiv sells into various end markets with data centers accounting for nearly two-thirds of total net sales. The company is 85% owned by Platinum Equity. Through the last twelve months ending September 30, 2016, net sales totaled approximately $4.4 billion.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Paul Aran
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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