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Rating Action:

Moody's affirms Lindblad Expeditions' CFR at B2; New first lien term loan and revolver rated B2

13 Mar 2018

Approximately $245 million of rated debt securities affected

New York, March 13, 2018 -- Moody's Investors Service ("Moody's") today affirmed Lindblad Expeditions, LLC's ("Lindblad" Nasdaq: LIND) Corporate Family Rating (CFR) and Probability of Default Rating (PDR) at B2 and B3-PD, respectively. At the same time, Moody's assigned a B2 rating to the company's newly proposed senior secured first lien credit facilities, consisting of a $45 million 5-year revolving facility and a $200 million 7-year term loan. Moody's also affirmed the company's Speculative Grade Liquidity Rating at SGL-1. Proceeds from the new term loan will be used to refinance existing term loan borrowings, add roughly $25 million of cash to the company's balance sheet, and pay transaction fees and expenses of about $4 million. As a result of the refinancing, Moody's plans to withdraw the ratings on the company's existing senior secured first lien credit facilities at the close of the transaction. The ratings outlook is maintained at stable.

According to Brian Silver, Vice President and Moody's lead analyst for the company, "The affirmation of Lindblad's ratings reflects our expectation that the company will grow its profitability, largely driven by its ongoing fleet expansion, and deleverage from FYE17 pro forma adjusted debt-to-EBITDA of approximately 4.6 times to below 4.0 times over the next 12 to 18 months. However, Lindblad will continue to be exposed to unforeseen factors that could inhibit travel, including viruses or security threats in certain regions among other factors outside of its control. In addition, mechanical failures led to some voyage cancellations in FY17, and while not anticipated to recur, they do represent an ongoing risk to our expectations."

The following ratings have been assigned (subject to final documentation):

New $45 million Gtd Senior Secured First Lien Revolving Credit Facility due 2023 at B2 (LGD3);

New $200 million Gtd Senior Secured First Lien Term Loan due 2025 at B2 (LGD3).

The following ratings have been affirmed:

Corporate Family Rating at B2;

Probability of Default Rating at B3-PD;

Speculative Grade Liquidity Rating at SGL-1.

The following ratings will be withdrawn at the close of the transaction (subject to final documentation):

$45 million Senior Secured First Lien Revolving Credit Facility due 2020 rated B2 (LGD3);

$175 million principal ($171 million outstanding) Senior Secured First Lien Term Loan due 2021 rated B2 (LGD3).

Outlook Action:

The ratings outlook is maintained at stable

RATINGS RATIONALE

Lindblad Expeditions, LLC's credit profile is constrained by its relatively small size and narrow product focus, susceptibility to factors that could inhibit travel, and exposure to consumer confidence and associated discretionary spending dynamics. In addition, the company is expected to generate negative free cash flow over the next year owing to growth capital investments stemming from the company's ongoing fleet expansion. Any mechanical failures or unplanned drydocking of Lindblad's ships could materially impact profitability. Moody's also expects the expedition industry to become increasingly competitive as a result of new entrants over the next few years. However, Lindblad's credit profile is supported by its relatively high margins and expectations for material deleveraging from approximately 4.6 times Moody's adjusted debt-to-EBITDA over the next 12 to 18 months. The company's credit profile is also supported by its partnerships with National Geographic and the World Wildlife Fund (via the 2016 acquisition of Natural Habitat) and differentiated distribution channels relative to the large cruise lines with a lower degree of reliance on travel agents. Lindblad also generates relatively high yields per passenger as a result of its premium pricing, which is largely a function of its travel to unique destinations which attract an affluent target market. The company is also expected to maintain very good liquidity supported by relatively large cash balances and the presence of a $45 million revolving credit facility.

The stable rating outlook reflects our expectation that the company will grow its revenue and profitability materially over the next 12 to 18 months, largely driven by capacity expansion from new ships. The company is also expected to maintain at least a good liquidity profile over the next twelve months as it continues to expand its fleet.

The rating could be downgraded if Lindblad's leverage, as measured by Moody's adjusted debt-to-EBITDA, is sustained above 5.0 times, if EBITDA margins are sustained below 15%, or if there is a material weakening of liquidity. Alternatively, the ratings could be upgraded if the company continues to grow its scale materially, EBITDA margins are sustained above 20%, and leverage is sustained below 3.75 times.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Lindblad Expeditions, LLC and its consolidated subsidiaries ("Lindblad" - Nasdaq: LIND), headquartered in New York, NY, is a provider of tour and adventure travel related services to over 40 destinations spanning all seven continents. The company owns and operates seven expedition ships and five seasonal charter vessels with capacities ranging from roughly 25 to 150 guests per voyage. In March 2015, Lindblad entered into a definitive merger agreement with Capitol Acquisition Corp. II (the "Sponsor") in a cash and stock transaction valued at $439 million. Lindblad generated sales for the twelve months ended December 31, 2017 (FY17) of approximately $266.5 million.

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.

Brian Silver, CFA
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

Russell Solomon
Associate Managing Director
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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