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Rating Action:

Moody's affirms TransFirst's B3 CFR on proposed dividend recap; outlook revised to stable

14 Dec 2012

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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 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 entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

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 before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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
No Related Data.
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