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17 Jun 2010
Approximately $255 million in debt affected
New York, June 17, 2010 -- Moody's Investors Service assigned a B1 corporate family rating
to first time issuer Vision Solutions, Inc. Moody's also
assigned B1 ratings to Vision's pending senior secured debt facilities.
The new debt facilities will be used to finance the acquisition of Double-Take
Software, Inc. for $242 million. The ratings
outlook is stable.
The B1 rating is driven by the company's moderately high leverage
(4.2x pro forma for the acquisition and certain cost synergies)
balanced by the combined companies strong market positions providing sophisticated
recovery and related software for key IBM System i and Windows based server
platforms. The combination allows Vision to be one of the few recovery
software providers that can provide solutions to mixed IBM Power Systems
and Windows server environments. The recovery software market is
expected to grow at moderate levels as complexity increases in server
environments and a greater proportion of servers implement or upgrade
their disaster recovery, replication, data migration and high
availability systems. The growing penetration is expected to offset
potential shrinking of the System i installed base. IBM's
System i line, while an established machine in numerous transaction
intensive environments, is not growing as it once was. The
ratings also consider the challenges of integrating the Double-Take
acquisition, turning around its performance and improving its maintenance
renewal rates to bring the business up to industry norms. Vision
has made several acquisitions in the last several years and appears to
have successfully integrated them, though none have been the size
of Double-Take, which is similar size to Vision but with
approximately half the EBITDA margin. Vision's rating is
on the low end of the B1 rating range given the challenges at Double-Take
and the above 4x starting leverage (all ratios include Moody's standard
adjustments but prior to preferred stock adjustments).
Both companies experienced material declines in license revenue during
the downturn but have seen signs of recovery in the most recent quarters
on a year over year basis. Double-Take's declines
appear to be greater than the industry's although specific recovery
industry data is difficult to ascertain. Overall both companies
generated strong levels of free cash flow through the downturn driven
by the resiliency of their maintenance revenue streams. Pro forma
for the transaction, Moody's estimates the combined companies
generated greater than 10% free cash flow to debt for the last
twelve months ended March 31, 2010 which is reflective of a B1 rating.
The following ratings were assigned:
Corporate family rating, B1
Probability of default, B2
$15 million Senior Secured Revolving Credit facility due 2015,
B1, LGD3 (33%)
$240 million Senior Secured Term Loan due 2016, B1,
Speculative grade liquidity rating, SGL-2
Ratings Outlook, Stable
The stable outlook reflects the expectation that revenues for both IBM
and Windows systems will grow modestly over the next year and that Vision
will be able to make improvements to Double-Take's margins
and maintenance renewal levels. The ratings could face downward
pressure if the integration does not go as planned or leverage levels
are not on track to fall below 4.0x by year end 2010.
The principal methodology used in rating Vision was Moody's Global Software
Methodology, published in May 2009 and available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Vision Solutions, Inc., headquartered in Irvine,
CA, is a provider of recovery and related software for IBM Power
Systems servers. Vision is majority owned and controlled by the
private equity firm, Thoma Bravo. The company had sales of
$94 million for the fiscal year ended October 31, 2009.
Alexandra S. Parker
Corporate Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Moody's assigns B1 ratings to Vision Solutions
No Related Data.
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