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I AGREE
10 Dec 2010
Approximately $200 Million of Long-Term Debt Securities Affected
New York, December 10, 2010 -- Moody's Investors Service, on November 12, 2010, reflected
the issuer for the then proposed senior unsecured notes as American Reprographics
Company, LLC. Rather, the issuer of the $200
million 10.5% senior unsecured notes due 2016 is American
Reprographics Company ("ARC"), which is the parent entity that wholly-owns
American Reprographics Company, LLC. Accordingly, Moody's
affirmed the B1 rating on these notes and re-assigned the B1 corporate
family rating and probability-of-default rating to American
Reprographics Company. American Reprographics Company, LLC
and domestic subsidiaries guarantee the new senior unsecured notes.
The ratings on the old credit facilities were withdrawn following their
recent redemption. The ratings outlook remains stable.
Moody's notes that changes to the final terms of the senior unsecured
notes did not impact the B1 rating that was assigned on November 12,
2010. The final amount was reduced to $200 million from
a then proposed amount of $220 million. In addition,
the maturity year was changed to 2016 from 2018. The LGD point
estimate remains LGD4, 55%.
The following summarizes the ratings activity:
American Reprographics Company
Ratings assigned:
Corporate family rating at B1;
Probability-of-default rating at B1.
Rating affirmed:
$200 million 10.5% senior unsecured notes due 2016
at B1 (LGD4, 55%).
American Reprographics Company, LLC.
Ratings withdrawn:
Corporate family rating at B1;
Probability-of-default rating at B1;
Senior secured revolving credit facility due 2012 at Ba2 (LGD2,
20%);
Senior secured term loan due 2012 at Ba2 (LGD2, 20%).
RATINGS RATIONALE
ARC's B1 corporate family rating continues to reflect its exposure to
the residential and commercial construction end-markets that are
both in a downturn, the generally cyclical nature of these industries,
significant regional concentration in California, and acquisition
risk as it seeks to expand its geographic presence. The rating
is supported by the company's moderate leverage, consistent free
cash flow generation, its leading position as a provider of document
management services, significant scale relative to its competitors,
the diversity of its customer base, and modest capital expenditure
requirements.
The stable outlook reflects Moody's expectation that, despite the
potential for protracted weakness in commercial construction end-markets,
revenues and earnings will likely remain stable or modestly improve over
the medium-term based on ARC's various growth initiatives.
The stable outlook also reflects our expectation that debt to EBITDA will
remain below 5.0 times and free cash flow to debt will be sustained
around 10%.
Moody's could revise the ratings outlook to positive if an expansion in
residential and commercial construction activity translates into sustained
improvements in ARC's operating performance and credit metrics.
Barring an exogenous event, such as a material debt financed acquisition,
Moody's does not anticipate ratings pressure given stabilizing end-market
conditions. Nevertheless, ARC's ratings could be pressured
if its revenue and earnings meaningfully contract from current levels
such that debt to EBITDA exceeds 5.5 times.
The principal methodologies used in this rating were Global Business &
Consumer Service Industry published in October 2010, and Loss Given
Default for Speculative-Grade Non-Financial Companies in
the U.S., Canada and EMEA published in June 2009.
Headquartered in Walnut Creek, California, American Reprographics
Company is a leading reprographics service company in the U.S.
The company recorded sales of $448 million for the twelve-months
ended September 30, 2010.
REGULATORY DISCLOSURES
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.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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.
New York
Daniel Marx
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's moves American Reprographics' B1 CFR to holding company
No Related Data.
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