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Rating Action:

Moody's affirms Mediaocean LLC's B2 CFR following dividend recap; outlook stable; rates new credit facilities B2

11 Oct 2019

New York, October 11, 2019 -- Moody's Investors Service ("Moody's") affirmed Mediaocean LLC's ("Mediaocean") B2 Corporate Family Rating (CFR) and B2-PD Probability of Default Rating (PDR). Simultaneously, Moody's assigned B2 instrument ratings to the company's proposed first lien bank credit facilities. The rating outlook is stable.

The proceeds from the new $693 million first lien term loan along with $23.5 million of cash from the balance sheet will be used to refinance the company's existing $293.3 million bank debt, fund a dividend to its private equity owners and pay transaction related fees. The ratings of the existing first lien term loan and revolver will be withdrawn upon completion of the refinancing.

"The dividend recapitalization is credit negative because Mediaocean's debt-to-EBITDA will increase substantially to 7.1x from 4x. However, the affirmation reflects Mediaocean's track record of significantly reducing leverage and its mid-single digit organic growth forecast, strong margins and expectations for positive free cash flow provide capacity to deleverage again," said Mariya Moore, Moody's lead analyst for Mediaocean.

Affirmations:

..Issuer: Mediaocean LLC

.... Corporate Family Rating, Affirmed B2

.... Probability of Default Rating, Affirmed B2-PD

Assignments:

..Issuer: Mediaocean LLC

....Gtd Senior Secured First Lien Term Loan, Assigned B2 (LGD3)

....Gtd Senior Secured First Lien Revolving Credit Facility, Assigned B2 (LGD3)

Outlook Actions:

..Issuer: Mediaocean LLC

....Outlook, Remains Stable

RATINGS RATIONALE

Mediaocean's B2 CFR reflects its high leverage of 7.1x pro forma debt-to-EBITDA at June 30, 2019 (as adjusted by Moody's), a relatively small revenue base, and narrow focus on software solutions for the advertising industry. Mediaocean's customer base consists predominantly of top-tier advertising agencies and accordingly is subject to considerable customer concentration and exposure to the growing, but cyclical advertising market which has been susceptible to economic downturns. Additionally, the rating also reflects an aggressive financial policy under private equity ownership and the risk of future debt-funded acquisitions and dividend distributions.

The rating is supported by the company's leading presence within its targeted market and a subscription centric sales model which provides a high degree of predictability given the company's multiyear contracts and longstanding relationships with top advertising agencies. Additionally, Mediaocean is well positioned to benefit from the ongoing secular shift towards digital advertising solutions among marketers from more mature, traditional channels.

The stable outlook reflects Moody's expectation that the increase in leverage is only temporary and that Mediaocean will reduce leverage significantly before any additional debt financed activities. The stable outlook also reflects Moody's forecast for mid-single digit organic revenue and EBITDA growth over the next 12-18 months, driven by an ongoing transition toward digital advertising solutions, which will support the company's deleveraging to below 6x.

The ratings could be upgraded if Mediocean's scale is increased substantially by generating consistent organic revenue and EBITDA growth such that adjusted leverage is expected to be sustained below 4x while demonstrating conservative financial policies.

The ratings could be downgraded if revenue declines and leverage were expected to be maintained above 6.5x on other than a temporary basis, or if free cash flow to debt were to fall below 5%.

The proposed first lien credit facility is expected to contain incremental facility capacity up to the greater of $132 million or 100% consolidated EBITDA, plus an additional amount subject to either a 5.25x pro forma First Lien Leverage Ratio or 7.25x Senior Secured Leverage Ratio, and step downs in the asset sale prepayment requirement to 50% and 0% subject to the First Lien Leverage test. In addition, Mediaocean will have the ability to release a guarantee when a subsidiary is not wholly-owned. The proposed document includes "blocker" provisions which provide additional restrictions on top of the covenant carve-outs limiting the ability to transfer intellectual property to unrestricted subsidiaries.

The principal methodology used in these ratings was Software Industry published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Mediaocean is a global, market-leading provider of financial and operational software solutions for the advertising industry, enabling agencies and brands to manage and coordinate the entire advertising workflow. The company, headquartered in New York City, is owned by funds affiliated with Vista Equity Partners and generated revenues of about $224 million as of the LTM period ended June 30, 2019.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

Mariya Moore
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

John E. Puchalla, CFA
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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