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Rating Action:

Moody's assigns B3 CFR to Aston Escrow Corporation; B3 senior secured notes

Global Credit Research - 18 Jul 2014

Approximately $440 million of debt rated

New York, July 18, 2014 -- Moody's Investors Service ("Moody's") assigned a B3 Corporate Family Rating and a B3-PD Probability of Default rating to Aston Escrow Corporation ("Aston") in connection with the acquisition of Transworld Systems, Inc. ("TSI", a carve-out of Expert Global Solutions, Inc.), by Platinum Equity Advisors ("Platinum"). Moody's also assigned a B3-LGD4 rating to a proposed, $440 million senior secured notes issuance, the proceeds from which, along with cash equity from Platinum, will be used to purchase TSI and pay related fees and expenses. At the closing of the transaction, Aston will merge with and into TSI, which will be the borrower post-merger. The rating outlook is stable.

RATINGS RATIONALE

A handful of uncertainties surrounding Platinum's acquisition of TSI pressures the credit rating of what is otherwise a not overly aggressive purchase of a soundly profitable target company, albeit one that faces real business risks. Those risks include customer concentration, a stagnant revenue base that is susceptible to regulatory changes, and the lack of an operating track record as a standalone entity that would give investors comfort with TSI's post-carveout cost structure. The B3 rating allows for weaker than anticipated performance at TSI, whose top line has been spotty in the recent past, and which will now be overseen by a private equity firm with leeway to pursue shareholder-friendly financial policies.

Platinum's modest equity contribution may not represent a large vote of confidence in the acquired business. The company is being sold at a notably low multiple, only about 6.0 times, leading us to wonder if operating weaknesses are more apparent from Platinum's vantage point than they are to debt investors. Still, we recognize not only that overall debt to EBITDA, at about 5.5 times (including Moody's standard adjustment) is moderate, but also that Platinum has had considerable success in acquiring small divested businesses from larger multinational firms, often for low multiples, and wresting incremental value from them. Moreover, over the past three years TSI has generated healthy free cash flows, averaging $46 million annually, an amount that, relative to post-acquisition debt, is strong for a B3 rating.

If the company can continue at or near the recent trajectory of free cash flow generation, TSI will build up a substantial cash balance. However, the combination of private-equity ownership and the absence of required debt amortization makes us skeptical about the prospects for deleveraging, even though we expect the company will have ample capacity to do so.

The stable outlook reflects Moody's expectations that increasing defaulted-student-loan volumes, rising absolute and out-of-pocket expenses for health care, and favorable trends generally for the outsourcing of collections services will drive revenue growth in the low single digits, although the landscape for both sectors is uncertain given the possible impacts from regulatory reform. Moody's could upgrade the ratings if TSI grows revenue at or better than the modest levels expected, such that leverage can be sustained at less than 5.0 times. Moody's could downgrade the ratings if revenues weaken abruptly, reflective, perhaps, of the loss of a significant customer, and if greater than anticipated operating expenses pressure profitability such that leverage and liquidity worsen materially.

With Moody's-expected 2014 revenues of $335 million, TSI is an accounts-receivable management and debt-collections-services provider to the educational, healthcare, government, and legal industries. The privately held company is headquartered in Horsham, PA and conducts its operations primarily within the United States.

Issuer: Aston Escrow Corporation

..Assignments:

.... Corporate Family Rating, Assigned B3

.... Probability of Default Rating, Assigned B3-PD

....Senior Secured Notes due 2021, Assigned B3, LGD4

The principal methodology used in this rating was the Global Business and Consumer Services Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative Grade Non-Financial Companies in the US, Canada, and EMEA, published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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 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 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 rating action, and whose ratings may change as a result of this 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.

Kevin Stuebe
Vice President - Senior 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

Lenny J. Ajzenman
Senior Vice President
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 assigns B3 CFR to Aston Escrow Corporation; B3 senior secured notes
No Related Data.
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