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Related Issuers
Rating Action:

Moody's assigns B1 rating to TriZetto's new credit facilities

13 Apr 2011

$750 million of rated debt affected

New York, April 13, 2011 -- Moody's Investors Service affirmed The TriZetto Group, Inc.'s ("TriZetto" or the "Company") B1 Corporate Family Rating (CFR) and assigned B1 ratings to the Company's proposed $750 million of senior first-lien secured credit facilities. The outlook for ratings is stable. TriZetto plans to use the net proceeds from the credit facilities primarily to retire existing debt and pay transaction fees and expenses. Moody's will withdraw the ratings for various tranches of TriZetto's existing credit facilities at the close of the transaction.

Moody's affirmed the following ratings:

Issuer -- TriZetto Group, Inc.

Corporate Family Rating -- B1

Probability of Default Rating -- B2

Moody's assigned the following rating:

$100 million senior secured revolving credit facility due 2016 -- B1 (LGD3, 33%)

$650 million senior secured Term Loan facility due 2018 -- B1 (LGD3, 33%)

The following ratings will be withdrawn:

$65 million senior secured revolving credit facility due 2014 -- B1 (LGD3, 33%)

$71 million senior secured Term Loan A facility due 2014 -- B1 (LGD3, 33%)

$315 million senior secured Term Loan B facility due 2015 -- B1 (LGD3, 33%)

$100 million senior secured Term Loan C facility due 2015 -- B1 (LGD3, 33%)

RATINGS RATIONALE

The affirmation of TriZetto's B1 CFR reflects the Company's good business execution, evidenced in the sustained revenue and EBITDA growth and EBITDA margin expansion, including through a weak capital spending environment during the recession and in the midst of regulatory uncertainly related to the healthcare reform legislation. The B1 rating considers TriZetto's moderate leverage, good free cash flow generation relative to debt, and in Moody's opinion, the Company's good niche market position as a provider of information technology (IT) solutions to the U.S. healthcare payers. The B1 CFR is supported by Moody's expectations of favorable growth trends in the healthcare IT industry segment, the Company's stable customer base, its unique investor and customer relationship with the BlueCross BlueShield of Tennessee and The Regence Group, and a good backlog of revenues under contract, which provides visibility into revenue and cash flows. In Moody's view, TriZetto's moderate financial risk affords the Company some cushion to pursue its expansion strategy, including small acquisitions, to exploit the additional revenue opportunity in the healthcare IT industry, which the rating agency expects to grow rapidly driven by the investments by healthcare payers in IT solutions to improve productivity.

The B1 rating is constrained by TriZetto's moderate scale in a highly competitive, though largely fragmented market for healthcare IT products and services, and the Company's moderate customer revenue concentration. The rating also reflects the risk that the financial sponsor's interests may not be aligned with those of debt holders and that de-leveraging from organic growth could be punctuated by leveraging events resulting from shareholder bias of the Company's financial policies.

Moody's expects TriZetto's Debt-to-EBITDA leverage to increase from 4.0x at year-end 2010 to about 4.6x (incorporating Moody's standard analytical adjustments including 25% of debt attribution to the preferred stock at intermediate holding company) at the close the transaction. The increase in leverage primarily reflects the largely debt-funded acquisition of Gateway EDI, LLC (Gateway), which the Company completed during 1Q 2011. Although Moody's believes that the combination with Gateway presents a large market opportunity connecting healthcare providers via Gateway's platform to TriZetto's payer customers, the acquisition of Gateway marks a shift in the Company's customer focus from servicing exclusively the healthcare plans and administrators to healthcare providers, and cash flow contribution from the acquisition will come from successful execution and penetration of new products. The acquisition also expands TriZetto's competitive scope as healthcare providers are serviced by several operators with a wide range of IT solutions. Nonetheless, Moody's considers the incremental effect of the Gateway acquisition on TriZetto's credit metrics to be moderate and within the expected ranges for the rating.

The stable outlook considers the potential for improved cash flow generation driven by revenue growth in mid single-digit percentages and additional EBITDA margin expansion reflecting operating leverage in the business.

While not anticipated in the near term, TriZetto's ratings could be downgraded if the Company's balance sheet deteriorates as a result of financial policies oriented towards shareholders or from large debt-financed acquisitions. The ratings could experience downward pressure if TriZetto's operating performance falls short of expectations, such that Debt-to-EBITDA leverage increases above 5.5x and free cash flow weakens to low single digit percentages of total debt.

Conversely, upward rating momentum could develop if TriZetto's business profile strengthens with increasing scale and growing diversity of revenues from expanded product solutions and good market penetration. Moody's could raise TriZetto's ratings if it maintains good competitive position, generates strong cash flow growth driven by earnings growth, and demonstrates it can accommodate its growth strategy and fiscal objectives -- including potential debt-financed shareholder returns -- and still sustain Total Debt/EBITDA (Moody's adjusted) of less than 4.0x.

For more detailed credit opinion, please refer to moodys.com website.

The last rating action on TriZetto took place on September 23, 2010, when Moody's affirmed TriZetto's CFR and maintained a stable outlook in connection with the Company's plans to amend it existing credit facility and redeem senior notes. On July 24, 2008 Moody's assigned TriZetto a first-time B1 corporate family rating and Ba3 ratings to its senior secured credit facilities.

The principal methodologies used in this rating were Global Business and Consumer Service Industry rating methodology published in October 2010, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Headquartered in Greenwood Village, Colorado, TriZetto is a provider of information technology solutions to the healthcare industry.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Raj Joshi
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns B1 rating to TriZetto's new credit facilities
No Related Data.
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