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Rating Action:

Moody's downgrades Getty's CFR to Caa1 reflecting additional delay for improved credit metrics; proposed note exchange will result in a limited default

04 Nov 2015

Roughly $2.4 billion of debt affected

New York, November 04, 2015 -- Moody's Investors Service downgraded Getty Images, Inc.'s ("Getty") Corporate Family Rating one notch to Caa1 from B3 and the Probability of Default Rating to Caa1-PD from B3-PD reflecting Moody's view that the company will need more time than previously expected to improve credit metrics, including leverage and free cash flow. Moody's also downgraded the company's senior secured credit facilities to B3 and the senior unsecured notes to Caa3. In addition, the company announced plans to issue $252.5 million of new 10.5% senior secured notes in exchange for $100 million of cash plus roughly $240 million of existing 7% senior unsecured notes representing a 36% discount to face value. Moody's views this transaction as a distressed exchange and will assign a "Limited Default" or "LD" to the company upon closing. The LD designation will be removed in three days. The rating outlook is changed to stable from negative.

Issuer: Getty Images, Inc.

..Downgrades:

.Corporate Family Rating ("CFR"): Downgraded to Caa1 from B3

.Probability of Default Rating ("PDR"): Downgraded to Caa1-PD from B3-PD

.Sr Secured 1st lien Term Loan due 2019: Downgraded to B3, LGD3 from B2, LGD3

.Sr Secured 1st lien Revolving Credit Facility due 2017: Downgraded to B3, LGD3 from B2, LGD3

.$550 million Senior Unsecured Notes due 2020: Downgraded to Caa3, LGD6 from Caa2, LGD6

..Outlook Actions:

.Outlook changed to Stable from Negative

RATINGS RATIONALE

The downgrade of Getty Images' corporate family rating to Caa1 reflects Moody's updated projections indicating excessive leverage with debt-to-EBITDA exceeding 9.0x (including Moody's standard adjustments) through the end of 2016 as a result of high single digit percentage revenue declines in the company's Midstock segment for FY2015 and free cash flow-to-debt of less than 1% over the next 12 months. As a result, the company will need more time to turnaround operating performance sufficiently to restore credit metrics to be in line with a higher debt rating. To the extent the company completes its note exchange as planned, leverage would increase slightly and annual free cash flow would erode by roughly $10 million from higher interest payments. Although cash balances would increase initially by roughly $90 million post-transaction, planned funding of growth investments and higher debt service will leave the company with only adequate liquidity and limited ability to reduce debt balances over the next 18 months. Getty expects targeted growth investments to enhance revenue and EBITDA; however, Moody's believes timing and the extent to which these benefits will be realized is uncertain. Moody's also views the company as having greater risk related to its financial policies as we believe Getty's growth investments should be funded with equity capital given the company's current high leverage. Incorporating preliminary results through September 2015, Moody's expects revenue to increase in the low-single digit percentage range over the next 12-18 months; however, we do not expect EBITDA to grow until after 2016 due to targeted investments. The company has an undrawn revolver maturing in 2017 and a $1.85 billion covenant-lite term loan maturing in 2019, followed by the note maturity in 2020. Moody's believes an orderly refinancing of the debt facilities will require debt-to-EBITDA closer to 6.5x, similar to leverage at closing of the October 2012 buyout by Carlyle. Risk of another distressed exchange remains high to the extent the company is not able to perform in line with its operating plan.

The stable rating outlook reflects Moody's expectations that revenue will grow in the low single-digit percentage range over the next 18 months and that debt-to-EBITDA will remain elevated over this period due to an increase in SG&A from planned growth investments. The outlook incorporates free cash flow-to-debt of less than 1% (including Moody's standard adjustments) over the next 12 months reflecting extraordinary tax payments and increased capital spending related to targeted investments. Ratings could be downgraded if operating performance tracks below Moody's expectations or if we believe the company will not be able to reduce leverage sufficiently to refinance the term loan in advance of its 2019 maturity in an orderly fashion. Ratings could also be downgraded if liquidity deteriorates or the company issues additional debt in excess of nominal levels. While unlikely in the next 18 months, ratings could be upgraded if the company demonstrates stability in Midstock revenue, free cash flow-to-debt improves to the mid single digit percentage range, and debt-to-EBITDA is sustained comfortably below 6.0x (including Moody's standard adjustments). Moody's would also need assurances that the company will be able to refinance near term maturities in an orderly fashion.

The principal methodology used in these ratings was Global Broadcast and Advertising Related Industries published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Seattle, WA, Getty Images, Inc. is a leading creator and distributor of still imagery, video and multimedia products, as well as a recognized provider of other forms of premium digital content, including music. The company was founded in 1995 and provides stock images, music, video and other digital content through gettyimages.com and iStockphoto.com. In 2012, The Carlyle Group completed the acquisition of a controlling indirect interest in Getty Images in a transaction valued at approximately $3.3 billion. The Carlyle Group owns approximately 51% of the company with a trust representing certain Getty family members owning approximately 49%. Revenue totaled $827 million for the 12 months ended June 30, 2015.

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.

Carl Salas
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.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Getty's CFR to Caa1 reflecting additional delay for improved credit metrics; proposed note exchange will result in a limited default
No Related Data.
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