$170 million in newly rated debt
New York, January 05, 2011 -- Moody's Investors Service today assigned a B1 rating to the new senior
secured credit facilities of Accuity Inc. and SourceMedia Inc (combined,
the "companies"). Concurrently, the Corporate
Family Rating of both companies was upgraded to B1 from B2 and the outlook
was changed to stable from negative.
RATINGS RATIONALE
Accuity and SourceMedia have announced they intend to refinance their
existing credit facilities with $170 million of new senior secured
debt. Accuity Inc. will be the borrower on a $110
million term loan and $20 million revolver, whereas SourceMedia
Inc. will be the borrower on a $35 million term loan and
$5 million revolver. Both revolvers are expected to be undrawn
at close. The two companies will be several borrowers with separate
credit facilities under a common loan agreement and will cross guarantee
each other's debt. Financial covenants will be measured based
on the combined companies' results.
The upgrade in the Corporate Family Rating to B1 from B2 reflects considerable
improvement in the companies' liquidity profile and key credit metrics,
despite continued demand weakness for SourceMedia's print publications.
Accuity's revenues have grown organically in each of the past several
years and its earnings now comprise about two-thirds of consolidated
results. Earnings expansion, along with debt reduction,
has materially reduced financial leverage and Moody's expects the
companies to maintain leverage below 5 times over the medium term.
The B1 rating is further supported by steady cash flow generation,
the diversity of revenue streams, and the recurring nature of Accuity's
subscription-based payment routing data that customers (predominantly
banks) use to manage payment efficiency and compliance needs. The
rating continues to be constrained by the companies' relatively
modest size, reliance on certain strategic partners, and the
secular decline in demand for print-based trade publications.
The stable outlook reflects Moody's view that potential revenue declines
at SourceMedia would be largely offset by continued organic growth at
Accuity. However, the ratings or outlook could become pressured
if the companies make sizable debt-financed acquisitions such that
liquidity deteriorates and financial leverage is sustained above 5 times.
While unlikely in the near-term, the ratings could be raised
if the companies realize sustained revenue growth while maintaining a
good liquidity profile, such that financial leverage falls below
4 times and interest coverage exceeds 3 times on an ongoing basis.
Moody's assigned the following ratings (and LGD point estimates) to Accuity
Inc.:
Proposed $20 million senior secured revolver due 2016, B1
(LGD3, 33%)
Proposed $110 million senior secured term loan due 2017,
B1 (LGD3, 33%)
Moody's upgraded the following ratings of Accuity Inc.:
Corporate Family Rating, to B1 from B2
Probability of Default Rating, to B2 from B3
Moody's assigned the following ratings (and LGD point estimates) to SourceMedia
Inc.:
Proposed $5 million senior secured revolver due 2016, B1
(LGD3, 33%)
Proposed $35 million senior secured term loan due 2017, B1
(LGD3, 33%)
Moody's upgraded the following ratings of SourceMedia Inc.:
Corporate Family Rating, to B1 from B2
Probability of Default Rating, to B2 from B3
Existing loan ratings have also been upgraded to B1 from B2 and will be
withdrawn upon closing of the transaction and ensuing repayment of outstanding
debt obligations. The ratings are subject to successful completion
of the proposed transaction and Moody's review of final documentation.
For additional information, please refer to the Credit Opinion to
be posted on moodys.com.
The principal methodology used in this rating was Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
SourceMedia and Accuity are headquartered in New York, New York
and are leading providers of information, data, and tools
for professionals in the financial services and related technologies markets.
Investcorp owns 100% of both companies. Combined revenues
for the twelve month period ended September 30, 2010 were $165
million.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not 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
Suzanne Wingo
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Steven Oman
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 rates Accuity and SourceMedia's new bank loans B1; CFR raised to B1