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Global Credit Research - 16 Mar 2011
Approximately $385 million in debt affected
New York, March 16, 2011 -- Moody's Investors Service downgraded Vision Solutions Inc.'s
("Vision") corporate family rating ("CFR") to
B2 from B1 and assigned ratings to its new debt facilities --
senior secured first lien debt at B1 and senior secured second lien debt
at Caa1. The new debt issued will refinance Vision's existing
senior secured loans and fund a payment to the sponsors. Ratings
on the existing senior secured loans will be withdrawn upon completion
of the transaction. The rating outlook is stable .
The rating action is driven by the increase in Vision's debt to
fund a $150 million payment to equity holders, and the indication
that Vision is willing to operate at higher levels of financial leverage
than in the past. The distribution comes about nine months after
Vision bought Double-Take Software, Inc. for $153
million, which effectively doubled Vision's size.
The B2 CFR reflects high financial leverage (with debt to EBITDA estimated
at 5.9x, pro forma the new debt as well as for a full year
of Double-Take performance), aggressive financial policy,
and limited scale. The ratings also recognize the company's
strong position providing sophisticated high availability, recovery
and related software for key IBM System i and Windows based server platforms.
The Double-Take acquisition positioned Vision to be one of the
few recovery software providers that provide solutions to mixed IBM Power
Systems and Windows server environments which should be a market advantage.
The market for high availability and related software is expected to grow
at 4-6% as complexity increases in server environments and
a greater proportion of servers implement or upgrade their disaster recovery,
replication, data migration and high availability systems.
While the overall industry is expected to grow, Vision's sales
of IBM System i licenses are expected to grow at a slower rate.
Though the IBM System i platform continues to be a well established machine
in numerous transaction intensive environments, it is a mature line.
The ratings also consider the challenges of integrating the Double-Take
acquisition, turning around its performance and improving its maintenance
renewal rates to bring the performance up to industry levels. Double-Take,
though well regarded in the industry, has experienced revenue declines.
These declines likely reflect shortcomings in its product lineup that
Vision must remedy to match industry growth.
Vision has made several acquisitions in the last several years and appears
to have successfully integrated them, though none have been the
size of Double-Take. Considering the challenges required
in fixing Double-Take though, the ratings are viewed as weakly
positioned in the B2 category given the high debt and financial leverage
compared to other software companies also at the B2 rating level.
Ratings could face downward pressure if Double-Take revenues continue
to decline or if leverage is expected to exceed 6x for an extended period.
Given the company's willingness to use leverage as evidenced by
this transaction, an upgrade is unlikely.
Liquidity is expected to be good post the dividend transaction driven
by expectations of positive free cash flow and a small ($15 million)
but undrawn revolver. Both businesses historically generated positive
free cash flow although with smaller interest burdens.
The following rating was downgraded:
Corporate family rating to B2 from B1
The following ratings were unchanged
Probability of default: B2
Speculative Grade Liquidity Rating: SGL-2
The following ratings were assigned:
Sr. Secured Revolver due 2015, B1 (LGD3 -- 31%)
Sr. Secured First Lien Term Loan due 2016, B1 (LGD3 --
Sr. Secured Second Lien Term Loan due 2017 Caa1 (LGD5 -- 85%)
Ratings on the existing debt facilities will be withdrawn at closing.
Ratings on the proposed debt instruments were determined in conjunction
with Moody's Loss Given Default Methodology. The first lien
debt are rated B1, the same as the previous first lien debt which
was similar in amount. The second lien debt rated at Caa1 to reflects
the relatively lower priority in recovery of that instrument.
Moody's most recent rating action was June 17, 2010 when Moody's
assigned first time ratings to Vision Solutions. The principal
methodology used in rating Vision was Moody's Global Software Methodology,
published in May 2009 and available on www.moodys.com in
the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Vision Solutions, Inc., headquartered in Irvine,
CA, is a provider of recovery and related software for IBM Power
Systems and Windows based servers. Vision is majority owned and
controlled by the private equity firm, Thoma Bravo. The company
had pro forma sales of approximately $178 million for the fiscal
year ended October 31, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 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.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Matthew B. Jones
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's downgrades Vision Solutions CFR to B2 on dividend recap
250 Greenwich Street
New York, NY 10007
No Related Data.
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