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I AGREE
14 Feb 2011
$460 million in rated debt affected
New York, February 14, 2011 -- Moody's Investor Service affirmed Datatel, Inc.'s
("Datatel" or the "Company") B2 Corporate Family
Rating following the Company's plans to increase the proposed credit
facilities from $430 million to $460 million. The
credit facilities are being raised in connection with Datatel's
plans to refinance existing debt and pay dividends to its shareholders.
The incremental proceeds from the upsized credit facilities will be used
to increase the dividend payout to Datatel's shareholders.
As part of the rating action, Moody's revised the rating for
Datatel's first lien credit facilities to Ba3 from B1, and
maintained the Caa1 rating for the second lien term loan. The outlook
for ratings is stable.
RATINGS RATIONALE
Pro forma for the increase in debt Datatel's Debt-to-EBITDA
leverage will increase by over 2.0x to 7.3x based on LTM
3Q 2010 EBITDA (incorporating Moody's analytical adjustments).
The affirmation of Datatel's Corporate Family Rating (CFR) reflects
Moody's view that while the Company's leverage will temporarily
exceed the tolerance level for its B2 CFR, Datatel will use a sizeable
portion of its highly predictable operating cash flows to reduce debt
such that leverage will decline to less than 6.0x over the next
twelve months. The increase in debt-funded distribution
to shareholders reinforces Moody's views that Datatel's aggressive
shareholder-oriented financial policies constrain its ratings and
offset its healthy operating performance.
Moody's revised the rating for Datatel's first lien credit
facilities to Ba3 from B1, consistent with its Loss Given Default
methodology, incorporating the proposed changes in the revised capital
structure.
The following ratings were affirmed:
Issuer: Datatel, Inc.
..Corporate Family Rating -- Affirmed B2
..Probability of Default Rating -- Affirmed
B2
....Proposed US$150 million 2nd Lien
Term Loan due 2018 -- Affirmed, Caa1, LGD5,
86%
....Existing First Lien Revolver due 2014
-- Affirmed, Ba3, LGD3, 32%,
to be withdrawn
....Existing First Lien Lien Term Loan due
2015 -- Affirmed, Ba3, LGD3, 32%,
to be withdrawn
....Existing Second Lien Term Loan due 2016
-- Affirmed, B3, LGD5, 86%,
to be withdrawn
The following ratings were revised:
Issuer: Datatel, Inc.
....Proposed US$40 million 1st Lien
Revolver due 2016 -- Changed to Ba3, LGD3, 32%,
from B1, LGD3, 32%
....Proposed US$270 million 1st Lien
Term Loan due 2017 -- Changed to Ba3, LGD3,
32%, from B1, LGD3, 32%
Please see Moody's press release of February 8, 2011 about
rating actions on the initially proposed capital structure.
What Could Change the Rating - Down
Datatel's rating could be downgrade if debt-funded acquisitions
or shareholder returns drive Debt-to-EBITDA leverage above
6.5x for an extended period of time. The rating could come
under pressure if the Company's competitive position weakens or operating
performance deteriorates such that free cash flow declines to less than
5% of total debt and debt-to-EBITDA leverage approaches
6.5x. Additionally, weak liquidity could also pressure
the rating downward.
What Could Change the Rating - Up
Moody's does not anticipate upward rating momentum in the near term,
given Datatel's weak credit metrics subsequent to the proposed dividend
recapitalization and its track record of shareholder-oriented fiscal
policies.
Moody's last rating action was on February 8, 2011, when Moody's
assigned ratings to Datatel's proposed credit facilities being raised
in conjunction with the Company's refinancing and dividend recapitalization
plans.
The principal methodologies used in this rating were Global Software Industry
published in May 2009 and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Headquartered in Fairfax, VA, Datatel provides ERP software
solutions and professional business services to higher education institutions
in North America.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics information.
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.
New York
Raj Joshi
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Datatel's B2 CFR following upsize of credit facility
No Related Data.
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