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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.          

 

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Rating Action:

Moody's assigns B2 CFR to Syncapay in connection with the planned merger and recapitalization; outlook stable

02 Dec 2020

New York, December 02, 2020 -- Moody's Investors Service ("Moody's") assigned a Corporate Family Rating (CFR) of B2 and Probability of Default Rating (PDR) of B2-PD to Newport Parent, Inc. (Syncapay) in connection with the proposed merger transaction and recapitalization by controlling shareholder Centerbridge Partners. The company's proposed $500 million first lien credit facilities ($50 million revolver and $450 million term loan) were assigned a rating of B2. The rating outlook is stable.

"Syncapay's solid niche positions result in good profitability and cash flow generation" said Peter Krukovsky, Moody's Senior Analyst. "Near-term revenue softness due to COVID will cause modestly elevated leverage in early 2021 on a trailing twelve month basis, but recent business trends support a return to growth later in the year reducing leverage to about 5.5x."

The following rating actions were taken:

Assignments:

..Issuer: Newport Parent, Inc.

.... Probability of Default Rating, Assigned B2-PD

.... Corporate Family Rating, Assigned B2

....Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)

....Senior Secured 1st Lien Revolving Credit Facility, Assigned B2 (LGD3)

Outlook Actions:

..Issuer: Newport Parent, Inc.

....Outlook, Assigned Stable

RATINGS RATIONALE

Syncapay is the product of the pending merger of daVinci Payments and North Lane Technologies. The company's credit profile reflects relatively small business scale, high leverage and merger integration risks. The credit profile is supported by solid competitive positions in defensible growing niches in the business-to-consumer payments sector, which benefits from the ongoing secular trend of replacement of checks with prepaid cards and other forms of electronic payments. However, the sector is highly competitive with increasing penetration of push payment services by industry leaders Visa, Mastercard and PayPal among others. Prior to the coronavirus (COVID) pandemic, Syncapay's revenue grew in the high single digits. Profitability is solid on a pro forma basis even before taking into account merger synergies, and free cash flow is ample at the contemplated level of financial leverage.

COVID has had an adverse impact on Syncapay's Incentives and Compensation segments, while the Disbursement business serving stable customer categories has continued to grow. Moody's regards the coronavirus outbreak as a social risk under the ESG framework. Softness in Incentives will likely extend into early 2021 due to the lag effect of the revenue model, and Compensation is unlikely to recover meaningfully until 2022. However, strong load volumes in Incentives in the fall of 2020 and continued stability and growth in Disbursement will support a return to LTM EBITDA growth by the second half of 2021, reducing leverage. Moody's expects the company to operate at Moody's adjusted total leverage of less than 6x in the ordinary course (synergies on as-realized basis). While an acquisition increasing debt levels is possible over time, Moody's does not expect meaningful acquisitions in 2021 as the company focuses on integration and achievement of synergies.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Moody's expectation of total leverage sustained below 6.5x with potential for reduction to 5.5x area by the end of 2021. The ratings could be upgraded if Syncapay generates consistent revenue and EBITDA growth, and if Moody's adjusted total leverage is reduced below 4.5x. The ratings could be downgraded if Syncapay experiences a sustained revenue or profitability decline, or if Moody's adjusted total leverage is sustained above 6.5x.

Syncapay's good liquidity is supported by cash balances of $20 million and a revolving credit facility of $50 million which will be undrawn at closing. We project free cash flow in 2021 of about $28 million. The revolving credit facility will contain a first lien secured leverage covenant of 7.3x with no stepdowns, applicable only if outstanding balances exceed 35% of the committed amount. The term loan will contain no financial covenants.

The first lien credit facility is expected to contain covenant flexibility for transactions that could adversely affect creditors, including incremental facility capacity, the ability to release a guarantee when a subsidiary is not wholly owned, and lack of "blocker" restrictions on collateral leakage through transfer to unrestricted subsidiaries.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, 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 issued the credit rating is available on www.moodys.com.

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.

Peter Krukovsky
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Lenny J. Ajzenman
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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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 credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

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

​
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