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Rating Action:

Moody's assigns definitive ratings to Evergood 4 ApS following the closing of the acquisition of Nets A/S

15 Feb 2018

London, 15 February 2018 -- Moody's Investors Service, ("Moody's") has today assigned a definitive B2 corporate family rating (CFR) and first time B2-PD probability of default rating (PDR) to Evergood 4 ApS (Nets or the company). The rating agency has also assigned a definitive B1 instrument rating to the EUR1,860 million first lien senior secured term loan BE due 2025, NOK2,795 million first lien senior secured term loan BN due 2025, and EUR200 million senior secured revolving credit facility (RCF) due 2024 (together the new first lien credit facilities), all raised by Evergood 4 ApS. The outlook on the ratings is stable.

Concurrently, Moody's has withdrawn Nets A/S' Ba2 CFR and Ba2-PD PDR and downgraded to B1 from Ba2 with a stable outlook the instrument rating on the EUR400 million senior unsecured notes due 2024 issued by Nassa Topco AS (the notes), a subsidiary of Nets A/S.

Nets A/S announced on 2 February 2018 that all conditions for the voluntary recommended public offer of Evergood 5 ApS to Nets A/S' shareholders have been satisfied after the acquisition vehicle received 94% acceptance from the target's shareholders. Evergood 5 ApS, a direct subsidiary of Evergood 4 ApS, is a newly formed company controlled by funds managed and advised by Hellman & Friedman LLC (Hellman & Friedman) which owns 70% of the acquisition vehicle together with a group of minority investors, including Sampo PLC, funds managed and advised by StepStone Group LP, and a fund managed by Fisher Lynch Capital LLC. The remaining equity is held by GIC Private Limited, funds managed and/or advised by Advent International Corporation, and funds managed and/or advised by Bain Capital Private Equity (Europe) LLP. The formal offer, which was sent to Nets A/S' shareholders on 23 October 2017, was conditional to receiving approval from more than 90% of the share capital and voting rights of Nets A/S.

Subsequent to the satisfaction of the conditions for the takeover of Nets A/S, Evergood 5 ApS decided to exercise its rights to complete a compulsory redemption of the shares in the target held by minority shareholders and requested the delisting of Nets A/S's shares from Nasdaq Copenhagen A/S to be effective on 12 February 2018.

RATINGS RATIONALE

The action to assign definitive ratings to Evergood 4 ApS reflects the closing of the acquisition of Nets A/S by the consortium of investors and the fact that the final terms of the legal documentation of the new first lien credit facilities and those of the second lien term loans (unrated) are mostly in line with the drafts reviewed for the assignment of provisional ratings on 20 November 2017.

The withdrawal of Nets A/S' CFR and PDR reflects the fact that Evergood 4 ApS is the top entity of the new banking group following the raising of the new first lien and second lien credit facilities and will produce audited consolidated accounts going forward.

The downgrade of the notes to B1, at the same level as the new first lien credit facilities, reflects the fact that Moody's considers these instruments to benefit from similar guarantee and security packages and thus assumes that the instruments are subject to a comparable loss given default. While the term loans currently outstanding at Nassa Topco AS will be repaid upon the closing of the transaction, the redemption of the notes is subject to the noteholders' exercising their put option following the change of control. Drawings under the first lien term loans will be reduced accordingly to the amount of notes which will remain outstanding due to noteholders not exercising their put option.

The rating agency considers that both the notes and first lien credit facilities benefit from an extensive guarantor package. Based on the offering memorandum, the notes' guarantors represented 78%, 77%, and 88% of the group's revenues, EBITDA, and total assets, respectively, for the year ended 31 December 2016. On the other hand, the first lien term loans benefit from guarantees from material subsidiaries representing at least 80% of group EBITDA, subject to restrictions. Additionally, while the notes are unsecured, the first lien credit facilities benefit from a relatively weak security package limited to a pledge over shares, bank accounts, and intercompany receivables. The second lien term loans benefit from the same guarantee and security package as the first lien facilities but on a second lien basis and are thus considered to be subordinated to both the first lien credit facilities and the notes.

The B1 ratings assigned to the first lien credit facilities and the notes, one notch above the CFR, reflects the cushion provided by the second lien term loans ranking below. The B2-PD PDR is at the same level as the CFR reflecting Moody's assumption of a 50% family recovery rate typically used for transactions including a mix of first lien and second lien facilities.

The stable outlook on the ratings reflects Moody's expectation that the company will continue experiencing organic growth rate at mid-single digit rates and generating free cash flow (FCF) at around 5% as a percentage of adjusted gross debt enabling the company to de-leverage towards 7x (on a Moody's adjusted basis) within 12-18 months from the closing of the transaction.

Factors that Could Lead to an Upgrade

Due to the weak positioning of Nets' rating within the B2 rating category, Moody's considers that an upgrade is unlikely in the short-term. Positive pressure on the rating could develop over time if (1) Nets maintains a strong momentum in terms of revenue growth at or above high-single digit rates while increasing its EBITDA margin, (2) Moody's adjusted gross leverage decreases towards 6x on a sustained basis, (3) the company generates FCF-to-debt at well above 5% on a sustained basis with a significant portion of the excess cash flow to be used for debt prepayment, and (4) Nets maintains a conservative financial policy and a good liquidity position.

Factors that Could Lead to a Downgrade

Negative pressure could arise if (1) Nets is subject to unfavorable regulatory changes or negative market developments leading to stable or declining revenues, (2) the company maintains a Moody's adjusted gross leverage at above 7.5x on a sustained basis resulting for example from large debt-funded acquisitions, or (3) its liquidity position weakens.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Copenhagen, Denmark, Nets is the largest pan-Nordic payments processor focusing on Norway, Denmark, Finland, and Sweden, and second largest in Europe. Nets generated revenues of DKK7,385 million and EBITDA before special items (company reported) of DKK2,619 million in fiscal year (FY) 2016. Nets is present at various points in the digital value payment chain by providing the merchant payment solutions, by acquiring the transactions, and by clearing and processing the transactions for issuers.

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 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.

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.

Sebastien Cieniewski
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Peter Firth
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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