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Rating Action:

Moody's affirms MDC's B1 CFR and B2 rating on senior unsecured notes

10 May 2010

Approximately $290 million of rated debt affected

New York, May 10, 2010 -- Moody's Investors Service affirmed the B1 corporate family rating of MDC Partners Inc. (MDC) as well as the B2 rating on its senior unsecured notes following its announced plans to issue an incremental $65 million of notes. The company expects to use proceeds primarily to support acquisitions, as well as to repay current borrowings under the revolver. Moody's anticipates that pro forma for cash flow from acquisitions, the transaction will not materially impact the company's credit profile, and the B1 corporate family rating incorporated expectations for some acquisition related leverage volatility. However, the increase in debt delays MDC's path to its stated goal of a more conservative credit profile and reduces its capacity to absorb additional acquisitions or shareholder returns and sustain its B1 corporate family rating.

Moody's also affirmed the SGL-2 speculative grade liquidity rating and continues to characterize the company's liquidity as good, notwithstanding expectations for incremental cash requirements from both the additional debt (approximately $7 million increase in annual interest expense) and the recently instated dividend (approximately $11 million annual cash use). Pro forma for the notes issuance, we anticipate full availability under the company's $75 million (unrated) revolving credit facility, which, combined with internally generated cash, supports good liquidity.

The outlook remains stable, reflecting expectations that MDC will generate free cash flow, maintain a good liquidity profile, and reduce leverage.

A summary of today's actions follows.

MDC Partners Inc.

....Senior Unsecured Bonds, Affirmed B2, LGD adjusted to LGD4, 63% from LGD4, 64%

....Corporate Family Rating, Affirmed B1

....Probability of Default Rating, Affirmed B1

....Speculative Grade Liquidity Rating, Affirmed SGL-2

Outlook, Stable

MDC's B1 corporate family rating incorporates its modest revenue and cash flow and more significant client, industry, and geographic concentration than rated industry peers, which creates greater potential revenue volatility from the loss of key clients or creative personnel. Its lack of scale also contributes to below average industry margins and has led the company to be acquisitive, which we anticipate will continue, resulting in event risk and the potential for leverage volatility. The company is targeting a conservative 1.5-2.5x net leverage ratio (excluding Moody's adjustments and with EBITDA calculated before stock comp), with the bondholder incurrence test (3.5x) providing some creditor protection, but we anticipate that acquisitions will delay progress in achieving these metrics. Nevertheless, the company benefits from good liquidity, critical for the industry, in Moody's opinion. Also, EBITDA growth from improving business fundamentals and the benefit of acquisitions will likely enable the company to lower leverage and build cash over the next year. MDC's good creative execution and experience with digital marketing channels position the company well to benefit from increased advertising spending as the economy improves, and the company maintained better than average revenue trends throughout the downturn.

Moody's most recent rating action for MDC occurred on October 16, 2009. At that time Moody's assigned a B1 corporate family rating and a stable outlook.

MDC's ratings were assigned by evaluating factors we believe are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of MDC's core industry and MDC's ratings are believed to be comparable to those of other issuers of similar credit risk.

MDC Partners Inc. is a marketing communications and consulting services holding company whose agencies serve customers across the globe. Annual revenues approximate $550 million.

New York
Karen Berckmann
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms MDC's B1 CFR and B2 rating on senior unsecured notes
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