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Rating Action:

Moody's assigns provisional ratings to Towergate's proposed debt issuance

01 Feb 2011

Group's B2 negative CFR affirmed

London, 01 February 2011 -- Moody's Investors Service has assigned provisional P(B1) ratings to the senior secured debt, revolver, acquisition facility, term loan A and term loan B and a P(B3) rating to the senior unsecured debt to be issued by Towergate Finance plc. At the same time, the B2 Corporate Family Rating at Towergate Partnership Limited (TPL) was affirmed with a negative outlook. Upon the closing of the refinancing transaction, the corporate family rating (CFR) will be transferred from TPL to Towergate Holdings II Limited (TH2). The rating action is in relation to the refinancing of substantially all of Towergate's debt and the planned acquisition of Countrywide and PowerPlace.

The following rating was affirmed with a negative outlook:

Corporate Family Rating: B2 (Towergate Partnership Limited)

The following provisional ratings were assigned to Towergate Finance plc with a negative outlook:

GBP280m senior secured notes: P(B1)

GBP10m Revolving Credit Facility: P(B1)

GBP90m Acquisition Facility: P(B1)

GBP100m Term Loan A: P(B1)

GBP160m Term Loan B: P(B1)

GBP290m senior unsecured notes: P(B3)

RATINGS RATIONALE

Moody's issues provisional ratings in advance of the final sale of securities and these reflect the rating agency's credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign definitive ratings to the instruments mentioned above. A definitive rating may differ from a provisional rating.

The transaction involves the refinancing of substantially all of Towergate's debt to be replaced by an acquisition facility, a revolver, term loans, senior secured and unsecured notes, all to be issued by Towergate Finance plc with a guarantee from TH2 and certain other group companies. In addition, unrated PIK notes are to be issued from Towergate Holdings I Plc, an intermediate holding company outside of the restricted group. As part of the transaction, Advent Private Equity will acquire 45% of the new ultimate holding company, Towergate PartnershipCo Limited, following an equity investment of GBP 200m. As part of the transaction, Countrywide and PowerPlace, previously owned separately by Towergate's shareholders, will also be acquired by Towergate shortly after closing.

The provisional debt ratings were assigned on the basis of the instruments' position within the Towergate Group, with the secured notes ranking pari passu with the revolver, acquisition facility and term loans, all secured on a first-priority basis and ahead of the senior unsecured notes.

Moody's added that the affirmed B2 CFR incorporates Moody's expectation of the EBITDA margin remaining consistently above 20% (YE 2009: Moody's calculated EBITDA margin: 29.7%). The affirmation also reflects Moody's expectation that the refinancing will lead to improvements in near-term financial leverage and coverage metrics from the 2009 level (2009 debt-to-EBITDA of 9.3x and interest coverage of 0.7x, on a Moody's basis), both of which are currently outside Moody's expectations for the current rating level. The affirmation also reflects Moody's view of the elongated debt maturity profile under the refinancing programme, which we consider an improvement versus the status quo. Upon completion of the transaction, the B2 CFR will be transferred from TPL to Towergate Holdings II Ltd, which post-completion will be the top holding company within the Towergate restricted group, owning all of, and benefitting from cashflows from, the controlled group's operating subsidiaries.

Whilst not considered likely in the short-term due to the current negative outlook, factors that could lead to an upgrade include a debt-to-EBITDA ratio of less than 4.5 times, interest coverage exceeding 3.0 times (both on a Moody's basis), together with a conservative strategy towards acquisitions as the business deleverages. Conversely, negative rating action could result from a failure to improve leverage/coverage metrics over the near-to medium term from the current (end 2009) levels. Further negative rating pressure could also arise in the event of a meaningful and unprofitable acquisition strategy, although we anticipate that Towergate's future acquisition strategy is likely to focus on small scale acquisitions.

The principal methodology used in this rating was Moody's Global Rating Methodology for Insurance Brokers & Service companies published in January 2008.

The last rating action was on 07 October 2010, when Moody's Investors Service withdrew its B1 senior secured and B3 senior unsecured debt ratings on Towergate Finance Plc due to the delay in issuance of these notes.

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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.

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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.

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London
David Masters
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Simon Harris
MD - Financial Institutions
Financial Institutions 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 provisional ratings to Towergate's proposed debt issuance
No Related Data.
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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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