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Rating Action:

Moody's Rates Realogy's New Secured Debt B1, Outlook to Positive, Affirms B3 CFR

Global Credit Research - 14 Feb 2013

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
No Related Data.

 

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