info

Yes No
Moodys.com
Terms of Use
REGULATORY AFFAIRS
CAREERS
ABOUT US
CONTACT US
HOME
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Can't read?
Try a new set
Send Cancel
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
OK
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
OK
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's assigns B1 rating to Harland Clarke's proposed term loan

24 Jan 2017

New York, January 24, 2017 -- Moody's Investors Service (Moody's) assigned a B1 rating to Harland Clarke Holdings Corp.'s (Harland Clarke) proposed $370 million term loan B-6 due February 2022 and the corporate family rating (CFR) is unchanged at B2. The existing term loan B-3, B-4, and B-5 and senior secured notes due in 2018 and 2020 are unchanged at B1 and the senior unsecured notes due 2021 are unchanged at Caa1. The outlook is stable.

The use of proceeds, along with an anticipated senior secured bond offering, is expected to repay 2018 debt maturities. Proceeds from the offerings will also be used to fund OID and transaction fees. The term loan B-6 will have a 2.5% annual amortization requirement and matures in February 2022, but the maturity will spring to November 2020 if the 9.25% senior unsecured notes are still outstanding. The anticipated transactions would extend the maturity date of its capital structure so that the next material debt maturity would be the term loan B-4 which is due in August 2019. The existing rating of the term loan B-3 will be withdrawn upon repayment.

The following is a summary of today's rating actions:

Issuer: Harland Clarke Holdings Corp.

Proposed $370 million term loan B-6 due February 2022, assigned a B1 (LGD3)

Existing term loan B-3 due May 2018, unchanged at B1 (LGD3)

Existing term loan B-4 due August 2019, unchanged at B1 (LGD3)

Existing term loan B-5 due December 2019, unchanged at B1 (LGD3)

Existing senior secured notes due August 2018, unchanged at B1 (LGD3)

Existing senior secured notes due March 2020, unchanged at B1 (LGD3)

Existing senior unsecured notes due March 2021, unchanged at Caa1 (LGD5)

Corporate Family Rating, unchanged at B2

Probability of Default Rating, unchanged at B2-PD

Outlook Rating, remains at Stable

RATINGS RATIONALE

Harland Clarke's B2 corporate family rating (CFR) reflects our ongoing concern that the combined business model is subject to secular decline in both its check printing and Valassis' print based advertising model. While the decline in checks has moderated, we expect the business to remain in secular decline due to new and evolving payment alternatives. The Valassis division faces pressure from the secular demand shift of advertisers' marketing spend and distribution to Internet-based / digital media channels, as well as the ensuing pricing pressure on traditional print-based media. We anticipate secular pressures to be moderate in the near term as there will be demand for both products for an extended period of time, but pressure has the potential to increase over time. The Scantron division, which is the smallest division, is also expected to remain under pressure due to the maturity of its form products. The ratings reflect the company's leverage of 4.6x for the LTM ended Q3 2016 including Moody's standard adjustments. The history of sponsor friendly and related party transactions is also reflected in the rating. Debt maturities in 2019 and 2020, pro-forma for the proposed term loan and expected note transaction, lead to moderately elevated refinancing risk and have the potential to cause negative rating action if not addressed one year prior to maturity.

Harland Clarke has a good track record of mitigating volume declines with price increases and costs savings, but we remain concerned these efforts will not be sufficient to prevent top line erosion if check volume declines should accelerate in the future. The acquisition of Valassis has enabled Harland Clarke to diversify its business lines and expand its customer base for which Valassis provides advertising and media delivery campaigns via its Shared Mail, Freestanding Inserts, and its smaller Digital Media businesses. Moody's considers client spend to be cyclical but believes the consumer value-oriented nature of the product offerings (including promotions and coupons) somewhat dampens the cyclicality since advertisers often reallocate marketing budgets to this type of advertising during economic downturns. Harland Clarke has achieved meaningful operational cost synergies and we anticipate additional costs savings to be realized going forward. The ratings are also supported by the company's good cash flow generation from its portfolio of businesses, EBITDA margins of 19% (as calculated by Moody's), and the 10% debt amortization requirement on the term loan B-5 and 2.5% requirement on the B-3, B-4, and proposed B-6 which accelerates debt repayment.

The stable outlook reflects our expectation that Harland Clarke will continue to generate good cash flow over the next 12 -18 months, seek to reinvest cash through acquisitions and investments, and utilize cash to fund required term loan amortization payments. We also expect total leverage will be in the mid 4x level over the next twelve months aided by required debt repayments.

Harland Clarke is expected to have good liquidity due to good free cash flow and a cash balance of $62 million as of Q3 2016. The company also has a $150 million asset backed revolver with $138 million of availability after accounting for $12 million of L/Cs outstanding as of Q3 2016. The asset back revolver matures in February 2018 and we expect the company will look to extend the maturity or refinance the facility in the near term. Interest coverage ratios are expected to be approximately 2.4x going forward. The term loans are covenant lite.

The anticipated transactions extend the maturity date of its debt structure so that the next debt maturities will be the B-4 term loan due August 2019 ($559 million) and B-5 in December 2019 ($780 million). The balances are expected to decline quarterly due to the above average amortization payments on the B-4 (2.5% annually) and B-5 (10% annually) term loans. Inability to refinance its debt in advance of one year prior to maturity could lead us to reassess the company's liquidity position.

Ratings could be upgraded if the company demonstrates stable organic revenue and EBITDA trends and leverage declines below 4x on a sustained basis with all near term maturities addressed. Confidence that the company would maintain financial policies that keep leverage below 4x on an ongoing basis would also be required.

Failure to address approaching maturities in advance of one year prior to maturity could lead to a downgrade. A downgrade could also occur if results suffer from accelerated deterioration in price or volume in its check business, demand and/ or pricing for Valassis' print-based marketing products erode at a faster-than-expected pace, a loss of market share, debt funded acquisitions, or distributions to the parent company that result in debt-to-EBITDA increasing above 5.5x. A weak liquidity position could also lead to a downgrade.

The principal methodology used in this rating was Global Publishing Industry published in December 2011. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Harland Clarke Holdings Corp. ("Harland Clarke"), headquartered in San Antonio, TX, is a provider of check and check related products, direct marketing services and customized business and home office products to financial services, retail and software providers as well as consumers and small businesses, and through its Scantron division, data collection, testing products, scanning equipment and tracking services to educational, commercial, healthcare and government entities. Its Valassis division offers clients mass delivered and targeted programs to reach consumers primarily consisting of shared mail, newspaper and digital delivery in addition to coupon clearing and other marketing and analytical services. M&F Worldwide Corp. ("M&F") acquired check and related product provider Clarke American Corp. in December 2005 for $800 million and subsequently acquired the John H. Harland Company in May 2007 for $1.4 billion. M&F merged the two companies to form Harland Clarke. M&F's remaining publicly traded shares were acquired by portfolio company, MacAndrews & Forbes Holdings, Inc. ("MacAndrews") on December 21, 2011. MacAndrews is wholly owned by Ronald O. Perelman. Harland Clarke acquired Valassis Communications, Inc. ("Valassis") on February 4, 2014. Reported revenue for the last twelve months ending Q3 2016 was $3.5 billion.

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.

Scott Van den Bosch
VP - Senior Credit Officer
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

John Diaz
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

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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 or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​
Moodys.com