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I AGREE
17 Feb 2011
London, 17 February 2011 -- Moody's Investors Service has today assigned a Ba2 corporate family rating
(CFR) and a Ba3 probability-of-default rating (PDR) to NDS
Group Ltd ("NDS" or "the company"), the parent company
of NDS Finance Ltd and the indirect parent company of NDS Holdings (Europe)
Limited and NDS Treasury (Americas), LLC. Concurrently,
Moody's has assigned provisional (P)Ba2 ratings to NDS' USD75
million six year revolving credit facility, EUR183 million six year
term loan A and the USD800 million seven year term loan B. The
outlook is stable.
The rating assignment follows the announcement on 14 February 2011 by
NDS that it would raise USD1.05 billion in credit facilities to
repay the company's existing debt, vendor loan note and related
fees and expenses. NDS is majority owned by private equity fund
Permira; who hold 50.5% of the shares, with News
Corp. owning 48.5% and management 1%.
RATINGS RATIONALE
"The Ba2 CFR reflects NDS' leading market position in the digital
pay-TV business solutions space, combined with its large
customer base of leading pay-TV companies," says Douglas
Crawford, Moody's lead analyst for NDS. "The company's
business profile is further supported by the large number of long term
contracts it holds with these companies to whom it is an integral part
of their content security and enabling business."
Moody's expects that NDS' leading market position in the niche digital
pay-TV business solutions space will continue to benefit from the
company's history of technological innovation.
However, Moody's notes NDS' degree of customer concentration,
with the top 3 customers representing around 46% of company revenues.
Moreover, the company operates in a market with rapid technological
developments, changes in industry standards and changes in customer
requirements that pose a significant medium term risk. Over time,
these include developments such as over-the-top services.
Moody's views NDS' financial risk profile post the refinancing as
appropriate for the rating. The rating agency expects the company
to use a high proportion of excess cash flow to repay debt, resulting
in leverage of under 4x (Moody's adjusted) by 30 June 2011. Moody's
ratings have also not incorporated the prospect of material dividends
until the company's metrics have improved.
In Moody's view, NDS' current liquidity profile is good,
due to the absence of debt maturities over the next few years and supported,
after the refinancing, with an undrawn USD75 million revolving credit
facility (RCF) that matures in 2017. The rating agency notes that
maintenance financial covenants under NDS' credit facility agreement
incorporate de-leveraging assumptions and will be set with headroom
of around 30%.
The Ba3 probability of default is one notch below the Ba2 CFR as a result
of the assumed Expected Family Recovery Rate (RR) of 65%,
given the bank debt-only capital structure. The (P)Ba2 ratings
of the USD75 million RCF, EUR183 million Term Loan A and USD800
million Term Loan B, at the same level as the CFR, reflect
the lack of a meaningful amount of other liabilities. Moreover,
the RCF, and both term loans are all rated (P)Ba2 as they have the
same security package and payments will be made pro rata in the event
of a default.
The stable outlook reflects Moody's expectation that NDS will maintain
its market share and high profitability by continuing to grow subscribers,
supported by growth in the pay-TV business solutions space.
The rating agency also expects the company to use cash to reduce debt,
while maintaining a solid liquidity profile.
Positive pressure could evolve if NDS' leverage reaches 3x and free
cash flow-to-debt (FCF/debt) approaches 16%.
On the contrary, negative pressure could develop on the rating if
leverage reaches 4.0x and FCF/debt approaches 8% or if the
criteria set for the stable outlook are not met.
Moody's issues provisional ratings in advance of the final sale of securities
and these ratings reflect the rating agency's preliminary credit opinion
regarding the transaction only. Upon a conclusive review of the
final documentation, Moody's will endeavour to assign a definitive
rating to the term loan. A definitive rating may differ from a
provisional rating.
The principal methodologies used in this rating were Global Business &
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.
Founded in 1988 and headquartered in the UK, NDS is a leading provider
of Pay-TV content security and delivery services, including
having133 million active NDS-protected set-top-boxes.
The company's primary revenue stream comes from providing Conditional
Access services to leading Pay-TV operators such as DIRECTV,
BskyB and Sky Italia. NDS has 5,300 people in 20 locations,
with over 75% dedicated to R&D. In FY2010 the company
reported revenue of USD944 million and adjusted EBITDA of USD294 million.
The company is majority owned by private equity fund Permira, with
50.5% of the shares, with News Corp. owning
48.5% and management 1%.
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
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a credit rating.
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Moody's adopts all necessary measures so that the information it uses
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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.
London
Douglas Crawford
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Chetan Modi
Senior Vice President
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Ba2 ratings to NDS
No Related Data.
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