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Rating Action:

Moody's assigns Bankrate a B2 CFR; Outlook Stable

Global Credit Research - 23 Jun 2010

$280 million of rated debt affected

New York, June 23, 2010 -- Moody's Investors Service assigned Bankrate, Inc. ("Bankrate") a B2 Corporate Family Rating (CFR), B1 Probability of Default Rating (PDR), and a B2 rating to the company's proposed $280 million senior secured notes due 2015. These first time ratings are assigned in connection with Bankrate's proposed acquisitions of NetQuote, Inc. ("NetQuote") and CreditCards.com ("CreditCards") for a combined purchase price of approximately $350 million. Proceeds from the notes, an incremental $80 million investment by equity sponsor Apax Partners, and existing cash will be utilized to fund the purchase of the equity and refinance the debt of NetQuote and CreditCads, and pay transaction fees and expenses. In conjunction with the transactions, approximately $238 million of existing Bankrate subordinated shareholder notes will be converted into preferred stock. The acquisitions improve Bankrate's scale in online credit card and insurance product information and will approximately double the company's revenue base. The rating outlook is stable.

Assignments:

..Issuer: Bankrate, Inc.

....Corporate Family Rating, Assigned B2

....Probability of Default Rating, Assigned B1

....Senior Secured Regular Bond/Debenture, Assigned B2, LGD4 - 66%

Outlook Actions:

..Issuer: Bankrate, Inc.

....Outlook, Assigned Stable

Bankrate's B2 CFR reflects the company's strong brand and good market position in online consumer finance advertising, high leverage following the acquisitions, integration risks given the significant scale of the acquisitions, exposure to highly cyclical client advertising spending, and event risks related to acquisitions and cash distributions or leveraging actions by the equity sponsor. The company has built a large audience of consumers searching for interest rate and other consumer finance product data, which Bankrate collects and posts in a variety of online and traditional media outlets. The audience of consumers close to a purchase decision attracts marketing spending by a wide variety of financial institutions seeking to generate customer leads. Bankrate's ability to generate high value leads and facilitate transactions for its marketing partners drives the majority of its revenue. Client marketing spending is highly sensitive to cyclical downturns in consumer spending and factors such as changes in interest rates that can materially affect demand for consumer finance products but are outside of the company's control.

Moody's does not consider the consumer rate and finance information as exclusive and entry barriers are low for online businesses. The relationships with financial data providers and scope and depth of the online databases (encompassing more than 3 million pieces of information daily) would nevertheless take time to replicate, which provides some near term protection from competitors. Bankrate's ability to drive a large majority of the traffic to its websites at no cost through search engine marketing enhances its margins, but is a potential risk should the cost of that traffic increase significantly.

Bankrate has grown aggressively through acquisitions since the current CEO arrived in 2004, but the size of the proposed acquisitions is much larger than the company has taken on previously. Moody's believes the enhancement to Bankrate's scale and market position as a result of the acquisitions is mitigated in the near term by integration risk and the financial leverage resulting from the incremental debt.

Debt-to-EBITDA leverage is high following the acquisitions (approximately 5.7x LTM 3/31/10 pro forma for the acquisitions, incorporating Moody's standard adjustments including partial debt treatment of the holding company preferred stock, excluding certain costs from EBITDA that will fall away as a result of the acquisition, and prior to the company's estimate of synergies). Moody's expects the recovery in client marketing spending from recent cyclical lows and realization of acquisition synergies will reduce leverage to a 5x range over the next 12-18 months. The company has a sizable pro forma cash position, but the majority of that cash relates to an accrual for dissenting shareholders in Apax' September 2009 acquisition. Moody's believes the absence of a revolver weakens Bankrate's liquidity position, which is exposed to volatile client marketing spending. Moody's expects the company will generate moderate free cash flow and there are no required debt payments over the next 12 months or financial maintenance covenants. Bankrate faces refinancing risk at the 2015 note maturity date and will be exposed to prevailing market conditions if the cash balance is not built up as the maturity approaches.

The stable rating outlook reflects Moody's expectation that Bankrate will generate modest free cash flow and reduce leverage as client spending recovers from recessionary levels and that consumer finance interest rates will increase only modestly over the next 12-18 months. Moody's anticipates that dissenting shareholder payment will be made within the next 12-18 months, and that Bankrate will utilize a portion of its free cash flow for acquisitions. Moody's does not expect in the rating that there will be sizable acquisitions or cash distributions to shareholders within the next 12-18 months.

The B2 rating and LGD4-66% assessment on Bankrate's proposed senior secured notes reflects the first priority lien on substantially all of the assets of Bankrate and its operating subsidiaries. The company does not plan to put in place a revolver in the near term and the note is the only debt instrument. Because of the single debt class and lack of financial maintenance covenants, Moody's utilizes a 65% mean family loss assumption in accordance with the Loss Given Default notching methodology, which results in a Probability of Default Rating of B1 that is one notch higher than the B2 CFR.

Please see the credit opinion that will be posted to www.moodys.com for additional information on Bankrate's ratings.

Bankrate's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Bankrate's core industry and believes Bankrate's ratings are comparable to those of other issuers with similar credit risk.

Bankrate, headquartered in North Palm Beach, FL, is a privately owned network of consumer banking and personal finance websites, which provides information on many finance related matters including mortgages, credit cards, auto loans, money market accounts, certificates of deposit, and home equity loans. Bankrate was acquired by private equity investment group, Apax Partners in September 2009 for approximately $555. Bankrate's revenue for the 12 months ended March 31, 2010 pro forma for the NetQuote and CreditCards acquisitions was approximately $258 million.

New York
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Neil Begley
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Bankrate a B2 CFR; Outlook Stable
No Related Data.
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