Approximately $2.5 billion of debt instruments affected
New York, December 13, 2012 -- Moody's Investors Service assigned a Caa1 rating to Igloo Holding Corporation's
(Igloo) proposed $350 million senior unsecured and unguaranteed
notes due 2017, and raised Interactive Data Corporation's
(IDCO) senior unsecured note rating to B3 from Caa1. Moody's is
also transferring the B2 Corporate Family Rating (CFR), B2 Probability
of Default Rating (PDR) and SGL-2 speculative-grade liquidity
rating from IDCO to its parent, Igloo, since Igloo is now
the top level debt issuer within the organization. Moody's updated
the loss given default assessments to reflect the revised debt structure.
The rating outlook is stable.
The company plans to utilize the net proceeds from the proposed bond offering
along with approximately $100 million of IDCO's cash to fund
a $440 million distribution to equity and option holders including
affiliates of Silver Lake Technology Management LLC and Warburg Pincus
(the equity sponsors). The increase in debt is an aggressive credit
negative move that raises the company's already high debt-to-EBITDA
leverage to approximately 7.3x (LTM 9/30/12 incorporating Moody's
standard adjustments and the proposed bond offering) and cash interest
expense by approximately $30 million. Moody's is nevertheless
maintaining the B2 CFR based on an expectation that Igloo will generate
positive free cash flow and return leverage below 7x in 2014. Leverage
is likely to remain high in 2013 as the company continues to fund investments
in product development and technical infrastructure including the completion
of its unified technology platform project. Moody's expects leverage
to drop meaningfully in 2014 primarily due to low single digit revenue
growth and cost savings and efficiencies generated from the company's
various infrastructure investments.
Assignments:
..Issuer: Igloo Holdings Corporation
....Corporate Family Rating, Assigned
B2
....Probability of Default Rating, Assigned
B2
....Speculative Grade Liquidity Rating,
Assigned SGL-2
....Senior Unsecured Regular Bond/Debenture,
Assigned a Caa1, LGD6 - 93%
Upgrades:
..Issuer: Interactive Data Corporation
....Senior Unsecured Regular Bond/Debenture,
Upgraded to B3, LGD5 - 76% from Caa1, LGD5 -
86%
LGD Updates:
..Issuer: Interactive Data Corporation
....Senior Secured Bank Credit Facility,
Changed to LGD2 - 26% from LGD3 - 32% (no
change to Ba3 rating)
Withdrawals:
..Issuer: Interactive Data Corporation
....Corporate Family Rating, Withdrawn,
previously rated B2
....Probability of Default Rating, Withdrawn,
previously rated B2
....Speculative Grade Liquidity Rating,
Withdrawn, previously rated SGL-2
RATINGS RATIONALE
Igloo's B2 CFR reflects its good market position in fixed income evaluated
pricing and reference data services for financial institutions,
tempered by high debt-to-EBITDA leverage, and event
risks related to acquisitions, cash distributions or other leveraging
actions by the equity sponsors. Igloo's broad coverage of
and evaluated pricing capabilities for a variety of securities,
global data collection infrastructure, good customer and geographic
diversity and a high percentage of recurring revenue contribute to its
market position and good cash flow generation. The importance of
the company's pricing and reference data content and services to daily
net asset value calculations for a wide range of money management firms
as well as limited exposure to primary market new issuance activity dampens
the magnitude of cyclical revenue volatility notwithstanding that earnings
of its primary customers are cyclical. Leverage is high,
but projected to decline to a mid 6x range in 2014. A good liquidity
position provides the company flexibility to manage efforts by its customer
base to streamline costs due to pressures from an uncertain economic environment
and increasing regulatory burdens.
Moody's is rating Igloo based on the company's disclosures
in the offering memorandum including a representation that it has no material
assets or liabilities other than as they relate to IDCO. In addition,
Moody's expects to receive sufficient ongoing information relating to
Igloo to monitor the company's financial position. Igloo's
proposed notes are not guaranteed and are, therefore, structurally
subordinated to IDCO's debt and liabilities. Payment of cash
interest on the notes is subject to IDCO generating sufficient restricted
payment (RP) capacity within its credit facility and unsecured notes to
distribute funds to Igloo. Moody's expects enough RP capacity
to fund cash interest, although Igloo has the option to pay interest
in kind if IDCO's RP capacity is not sufficient to fund cash interest.
The proposed 2017 maturity is also prior to the maturity of IDCO's
credit facility (February 2018) and senior unsecured notes (August 2018)
As a result, IDCO would need to have enough RP capacity within its
debt agreements to fund the maturity of Igloo's notes. Such
RP capacity may not be sufficient to fund the maturity depending on the
level of future earnings, acquisitions and equity holder distributions.
However, Moody's believes the most likely outcome is a refinancing
of the entire capital structure, potentially in conjunction with
a sale of the company. A default on Igloo's notes at maturity
would not trigger a default under IDCO's debt agreements.
Consistent with Moody's Loss Given Default Methodology, the
upgrade of IDCO's senior unsecured notes reflects the new debt cushion
provided by Igloo's notes. Igloo's structurally subordinated
notes would absorb the first loss in the event of a default.
The SGL-2 speculative-grade liquidity rating reflects the
company's good liquidity position supported by its cash (approximately
$165 million as of 9/30/12 incorporating the proposed offering),
marketable securities ($23.6 million held in foreign subsidiaries
as of 9/30/12) and Moody's projection for approximately $60-70
million of free cash flow over the next 12 months. The undrawn
$160 million revolver matures in July 2015 and provides additional
liquidity support. There is no required term loan amortization
over the next year as the March 2012 excess cash flow sweep pay down payment
was applied to prepay amortization through March 2014. The proposed
notes are not included in the leverage or interest coverage covenants
in IDCO's credit agreement (although the $100 million cash
distribution will reduce the cushion in the leverage covenant, which
is based on debt net of cash), and Moody's projects IDCO will
maintain an EBITDA cushion in excess of 25% within the financial
maintenance covenants over the next year.
The stable rating outlook reflects Moody's expectation that IDCO
will maintain a good liquidity position, generate modest revenue
growth, and maintain positive free cash flow. Moody's
anticipates Igloo will utilize free cash flow for modest debt reduction
(via the excess cash flow sweep and required term loan amortization),
reinvestment through organic development and modestly sized acquisitions
and to create capacity for distributions to equity sponsors over time.
Moody's expect Igloo's debt-to-EBITDA will decline
to a mid 6x range in 2014 and that it will refrain from large debt financed
acquisitions and shareholder distributions for the next 18-24 months.
Downward rating pressure could occur if Igloo is unable to reduce and
maintain debt-to-EBITDA below 7x or if further debt financed
acquisitions and shareholder distributions occur. A decline in
earnings resulting from reduced client spending, client losses,
or a prolonged economic downturn could pressure the rating. IDCO's
ratings could also be downgraded if liquidity deteriorates.
IDCO could be positioned for an upgrade if it maintains a good liquidity
position, generates consistent revenue growth and solid free cash
flow, and demonstrates the willingness and ability to sustain debt-to-EBITDA
leverage comfortably below 6.0x and free cash flow-to-debt
above 5%.
Please see the credit opinion posted to www.moodys.com for
additional information on IDCO's ratings.
IDCO'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; (iii) 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 IDCO's
core industry and believes IDCO's ratings are comparable to those of other
issuers with similar credit risk. Other methodologies used include
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Igloo, headquartered in Bedford, Massachusetts, is a
provider of financial market data, analytics and related solutions
to financial institutions and active traders, as well as software
and service providers. Affiliates of Silver Lake Technology Management
L.L.C. and Warburg Pincus LLC (the equity sponsors)
acquired IDCO on July 29, 2010 for a purchase price of approximately
$3.7 billion (including transaction fees and expenses).
Revenue for the LTM ended September 2012 was approximately $880
million.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 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.
John E. Puchalla
VP - Senior Credit Officer
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
John Diaz
MD - Corporate Finance
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 Caa1 rating to Igloo Holding's proposed 2017 notes
