Approximately $650 million of rated debt affected
New York, December 14, 2012 -- Moody's Investors Service affirmed TransFirst Holdings, Inc.
("TransFirst") B3 Corporate Family Rating (CFR) and assigned B1 and Caa2
ratings to the company's proposed first and second lien credit facilities,
respectively. In addition, Moody's will withdraw the ratings
for TransFirst's existing credit facilities at the close of the proposed
transaction. The rating outlook is revised to stable from positive.
RATINGS RATIONALE
Moody's revised TransFirst's ratings outlook to stable from
positive to reflect the increase in debt. Accordingly, Moody's
believes that it will take longer for TransFirst to de-lever to
a level that would warrant an upgrade (i.e., adjusted
debt-to-EBITDA leverage of less than 6x and free cash flow
to debt in the high single digit percentages).
The company will use the proceeds from the new credit facilities and cash
on hand to refinance $425 million of existing debt, and pay
a distribution to common and preferred shareholders of approximately $200
million. The proposed transaction will increase TransFirst's
total debt-to-EBITDA leverage to the high 6x range from
5.2x (including a 25% attribution to the preferred stock).
The B3 rating considers TransFirst's high debt leverage and tolerance
for high financial risk under its financial sponsors. The rating
additionally reflects TransFirst's limited operating scale and highly
competitive market for payment processing services to small and medium
size businesses. TransFirst's credit profile is supported
by the predictability of its recurring revenues derived from a highly
diverse customer base with low industry concentration.
The stable outlook reflects Moody's expectation that TransFirst
will maintain organic EBITDA growth in the low teens percentage driven
by good sales execution, stable revenue attrition levels,
and growth in processing volumes. Moody's expects the company
to produce free cash flow in excess of $40 million in 2013.
TransFirst's ratings could be upgraded if Moody's anticipates
that the company will achieve sustained organic revenue and EBITDA growth,
reduces total Debt-to-EBITDA to below 6x (including 25%
debt attribution to preferred stock) and free cash flow to total debt
ratio in the high single digit percentages.
Moody's could downgrade TransFirst's ratings if liquidity
deteriorates, the company is unable to sustain adjusted debt-to-EBITDA
below 7x, or free cash flow turns negative for an extended period
of time.
Moody's has taken the following ratings:
...Issuer: TransFirst Holdings, Inc.
...Corporate Family Rating -- Affirmed B3
...Probability of Default Rating --
Affirmed B3
....$50 million Senior Secured Revolving
Credit Facility, due 2017 -- Assigned B1 (LGD3, 31%)
....$400 million Senior Secured 1st
Lien Term Loan, due 2017 -- Assigned B1 (LGD3,
31%)
....$200 million Senior Secured 2nd
Lien Term Loan, due 2018 -- Assigned Caa2 (LGD5, 84%)
....Existing Senior Secured Revolving Credit
Facility, due 2013 -- B2 (LGD3, 33%), to
be withdrawn
.... Existing Senior Secured 1st Lien Term
Loan, due 2014 -- B2 (LGD3, 33%), to be
withdrawn
.... Existing Senior Secured 2nd Lien Term
Loan, due 2015 -- Caa2 (LGD5, 84%), to be
withdrawn
Outlook: Stable, changed from positive
The principal methodology used in rating TransFirst Holdings, Inc.
was the Global Business & Consumer Service Industry Rating 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.
New York-based TransFirst Holdings, Inc. is a merchant
acquirer and provides payment processing services to small and medium
size businesses in the U.S. TransFirst reported net revenues
of approximately $216 million in the twelve months ended September
30, 2012 and is owned by funds affiliated to private equity firm
Welsh, Carson, Anderson & Stowe.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
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a rating.
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Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
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Please see Moody's Rating Symbols and Definitions on the Rating Process
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Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
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on our website www.moodys.com for further information.
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.
Raj Joshi
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
Alexandra S. Parker
MD - Corporate Finance
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 affirms TransFirst's B3 CFR on proposed dividend recap; outlook revised to stable