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Rating Action:

Moody's downgrades Audatex's corporate family rating to Ba2, rates new senior notes Ba2

27 Jun 2013

Approximately $1.8 billion of debt affected

New York, June 27, 2013 -- Moody's Investors Service lowered the Corporate Family Rating of Audatex Holdings, LLC ("Audatex") to Ba2 from Ba1, assigned a Ba2 rating to the proposed senior unsecured notes to be issued by Audatex North America, Inc. and affirmed the Speculative Grade Liquidity Assessment at SGL-1 and senior unsecured notes at Ba2. All other ratings are unchanged. The ratings outlook is stable. Proceeds of the new Notes due 2021 are expected to be used to repay approximately $287 million of existing term loans (whose ratings would be withdrawn upon repayment), with the remaining proceeds (about $400 million) likely to be used for one or more strategic acquisitions or general corporate purposes.

RATINGS RATIONALE

The downgrade to a corporate family rating of Ba2 reflects Moody's expectation of higher financial leverage going forward as Audatex steps up its acquisitions to pursue diversification and greater scale, rather than the deleveraging previously anticipated. Specific targets have yet to be identified. However, if Audatex completes acquisitions at typical industry multiples, pro-forma debt-to-EBITDA is likely to remain above the last twelve months' 3.9x level (after Moody's standard adjustments for debt). Audatex has established a solid track record of revenue and earnings growth, both organically and through acquisitions. However, acquisition targets in its core markets may not carry (or be integrated to realize) the high, 40+% EBITDA margins that Audatex currently enjoys. Expansion outside the core vehicle-claims-processing end market (such as property-claims databases) exposes Audatex not only to integration risk, but also to heightened competition with other providers which could lead to lower margins. As well, the stated Mission 2020 goal of $2 billion in revenue and $800 million in EBITDA by the year 2020 could result in some expensive acquisitions and for Audatex to maintain higher than historic financial leverage to do so. Moody's previously noted that debt-financed acquisitions or more aggressive financial policies could lead to a ratings downgrade, particularly if debt-to-EBITDA is sustained at more than 3.5x, and the new, incremental debt issuance indicates Audatex does not intend to delever in the near term.

The stable outlook anticipates steady organic revenue growth at the low-single-digit level with roll-out of added services to existing customers and growing claims volumes in developing markets, stable profit margins, as well as some increased revenue and profits from acquisitions. The ratings could be upgraded if Audatex is able to continue to grow in line with its long-term plan while maintaining the consistent 40%+ EBITDA margins, sustain debt to EBITDA in the 3.0x range, and maintain strong liquidity. Ratings could be downgraded if the company undertakes acquisitions that, after integration, fall well short of realizing the target margins, if Moody's expects debt-to-EBITDA to approach the high 4.0x level, or if Moody's expects free cash flow to fall below approximately $100 million.

Downgrades:

..Issuer: Audatex Holdings, LLC

.... Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD

.... Corporate Family Rating, Downgraded to Ba2 from Ba1

Assignments and Loss Given Default Assessment

..Issuer: Audatex North America, Inc.

....Senior Unsecured Regular Bond/Debenture, Assigned Ba2 (LGD4, 51 %)

Affirmations:

..Issuer: Audatex Holdings, LLC

.... Speculative Grade Liquidity Rating, Affirmed SGL-1

..Issuer: Audatex North America, Inc.

....Senior Unsecured Regular Bond/Debenture June 15, 2018, Affirmed Ba2

The principal methodology used in this rating was Global Business & Consumer Service Industry published in October 2010. 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.

Audatex, a wholly-owned subsidiary of Solera Holdings, Inc. (ticker: SLH), is a leading global provider of software and services to the automobile insurance claims processing industry

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 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 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 rating action, and whose ratings may change as a result of this 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.

Kevin Stuebe
Vice President - Senior Analyst
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

Robert P Jankowitz
Associate Managing Director
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 downgrades Audatex's corporate family rating to Ba2, rates new senior notes Ba2
No Related Data.
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