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22 Oct 2010
Approximately $1.4 billion of rated debt affected
New York, October 22, 2010 -- Moody's Investors Service downgraded the Corporate Family Rating (CFR)
for Getty Images, Inc. ("Getty Images") to Ba3 from Ba2 and
its Probability of Default Rating (PDR) to B1 from Ba3. Moody's
also assigned Ba3 ratings to the company's new senior secured credit
facilities. The rating outlook is stable. The downgrade
was prompted by the company's plans to pay a special dividend of
approximately $495 million to be funded in part by the proposed
refinancing of its existing credit facilities. The downgrade reflects
Moody's expectation that the company's financial leverage,
which is expected to rise as a result of the refinancing, is likely
to remain above historical levels based on management's acquisition
strategy and shareholder-friendly policies. Getty Images
plans to incur incremental debt of approximately $480 million and
issue a new $100 million senior secured, first-lien
revolver and a new $1,270 million senior secured, first
lien term loan to fund the dividend and refinancing transactions.
..Issuer: Getty Images, Inc.
.Corporate Family Rating, Downgraded to Ba3 from
.Probability of Default Rating, Downgraded to B1
..Issuer: Getty Images, Inc.
....NEW $100 million senior secured,
first lien revolver due 2015 - Ba3, LGD3-32%
....NEW $1,270 million senior
secured, first lien term loan due 2016 -- Ba3, LGD3-32%
To be withdrawn upon repayment at the close of the transaction:
..Issuer: Getty Images, Inc.
....$75 million senior secured,
first lien revolver - to be withdrawn
....$970 million senior secured,
first lien term loan -- to be withdrawn
The Ba3 corporate family rating reflects Getty Images' leading market
position in the stock imagery market, geographic diversification
of its customer base, stable EBITDA margins, and free cash
flow generation. Management has a track record of maintaining EBITDA
margins even as the company acquired businesses or experienced revenues
declines. Despite weakness in global advertising demand which negatively
impacted traditional imagery sales notably in 2008 and 2009, Getty
Images was able to maintain EBITDA margins above 29%. Getty
Images will incur an increase in its debt balances of approximately $480
million to fund its planned dividend. Pro forma for the dividend,
the company's debt-to-EBITDA leverage ratio is approximately
4.4x (including Moody's standard adjustments). The
Ba3 rating reflects Moody's expectations that the debt-to-EBITDA
leverage ratio will decrease to approximately 4.0x by the end of
2011 reflecting single digit revenue growth, sustained EBITDA margins
and 9-10% free cash flow as a percentage of debt (or more
than $110 million) for 2011. The company's rating
also considers the declining trends in its traditional higher quality
creative stills business, the increasing supply of lower priced
digital imagery, and potential threats from new competitors or technologies;
however, we believe growing demand for the company's microstock
products is likely to offset weakness in the traditional segment.
Risks associated with the potential for additional dividends or a debt
financed acquisition constrain the CFR at Ba3. While the rating
reflects our expectation that Hellman & Friedman LLC and management
will continue to demonstrate financial discipline by reducing leverage,
we believe event risk is high based on the company's acquisitive nature
and shareholder-friendly financial policies, and that,
as a result, leverage could rise above current levels over the rating
The stable outlook reflects our expectation that demand for the company's
microstock products and other services will largely offset softness in
the company's traditional imagery business. We also expect
the company's consolidated performance will improve at least modestly
as the economy recovers and that free cash flow will be applied to reduce
debt balances. The stable outlook reflects our expectation that
the debt-to-EBITDA leverage ratio will not exceed 5.0x
(incorporating Moody's standard adjustments).
Ratings could face downward pressure if overall performance were to deteriorate
resulting in declining revenues, erosion in EBITDA margins or reduced
cushion to financial covenants. Another leveraging event,
including a sizable debt financed acquisition or distribution, could
also result in a downgrade. While unlikely due to the company's
shareholder-friendly policies demonstrated by the proposed $495
million dividend, ratings could be considered for an upgrade if
debt-to-EBITDA leverage ratios were to be sustained below
3.0x (incorporating Moody's standard adjustments) in combination
with the stabilization of the traditional imagery business and organic
growth across operating segments.
The last rating action was on June 9, 2008 when Moody's assigned
ratings to new debt instruments, as well as a CFR and PDR,
in conjunction with its acquisition by Hellman & Friedman LLC.
The principal methodologies used in rating Getty Images, Inc were
Global Business & Consumer Service Industry published in October 2010,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
Getty Images, Inc. ("Getty Images") is a leading
creator and distributor of still imagery, footage and multimedia
products, as well as a recognized provider of other forms of premium
digital content, including music. The company is headquartered
in Seattle, Washington.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Assigns Ratings to Getty Images' New Sr Secured Credit Facilities; Lowers CFR to Ba3
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