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I AGREE
21 Jan 2011
$660 million of newly rated debt
New York, January 21, 2011 -- Moody's Investors Service today assigned a Ba3 rating to the first
lien credit facility and a B3 rating to the second lien term loan offered
by Allied Security Holdings LLC ("Allied Security").
Concurrently, all existing ratings were affirmed, including
the B1 Corporate Family Rating ("CFR"). The ratings
outlook remains stable.
Allied Security is seeking to refinance its existing $417 million
senior secured term loan and $175 million of mezzanine debt with
a $395 million first lien term loan, a $190 million
second lien term loan and cash on hand. At the same time,
the company intends to amend and extend its revolving credit facility
and increase capacity to $75 million. The revolver is expected
to be undrawn at close, though about $23 million of letters
of credit will effectively reduce availability.
RATINGS RATIONALE
Allied Security's B1 CFR incorporates the relatively recession-resistant
nature of end market demand for security services. The company
has grown revenue, enhanced margins and steadily generated higher
cash flow since the LBO in August 2008, despite a difficult economic
environment. Moody's views the proposed transaction favorably,
as an expected reduction in interest expense should improve cash flow
and interest coverage while extending debt maturities by about two years.
The rating continues to reflect the company's good liquidity profile,
the value of the AlliedBarton brand and its market position as one of
the largest security firms in the US.
The company's ratings remain constrained by high financial leverage and
equity-friendly financial policies. As of September 30,
2010, financial leverage (total debt / EBITDA) was about 5.7
times using Moody's standard adjustment to capitalize off-balance
sheet operating leases. Moody's views it unlikely that Allied Security
will make voluntary debt reductions in the near term, given the
August 2010 decision to distribute capital to shareholders. Nonetheless,
the stable outlook reflects Moody's expectation that financial leverage
may improve to some extent from modest organic revenue and earnings growth.
While an upgrade is unlikely in the near term, the ratings or outlook
could be raised if Allied Security permanently reduces debt such that
financial leverage and free cash flow to debt can be sustained below 4
times and above 10%, respectively. Negative ratings
pressure could result from incremental debt or a deterioration in earnings
that causes financial leverage to remain above 5.5 times.
Additionally, a negative rating action may be taken if liquidity
declines or if free cash flow to debt and interest coverage (EBITDA less
capex to interest) fall below 4% and 1.7 times, respectively.
For further information, please refer to the credit opinion to be
posted on Moodys.com. The ratings are subject to Moody's
review of final documentation.
Moody's assigned the following ratings (and Loss Given Default point estimates,
as noted):
$75 million proposed first lien revolving credit facility due 2016
-- Ba3 (LGD3, 33%)
$395 million proposed first lien term loan due 2017 --
Ba3 (LGD3, 33%)
$190 million proposed second lien term loan due 2018 -- B3
(LGD5, 86%)
Moody's affirmed the following ratings:
Corporate Family Rating -- B1
Probability of Default Rating -- B1
$66.5 million senior secured revolving credit facility due
2/2014 -- Ba3 (LGD3, 34%) -- to be withdrawn
upon closing of the transaction and ensuing debt repayment
$417 (formerly $422) million senior secured term loan due
2/2015 -- Ba3 (LGD3, 34%) - to be withdrawn
upon closing of the transaction and ensuing debt repayment
The principal methodologies used in this rating were Global Business &
Consumer Service Industry Rating Methodology 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.
Allied Security Holdings LLC, headquartered in Conshohocken,
Pennsylvania, is a leading provider of security services in the
US. The company is privately-owned by affiliates of The
Blackstone Group, institutional investors, and members of
management. In the last twelve months ended September 30,
2010, Allied Security reported revenues of about $1.7
billion.
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 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
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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
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 rates Allied Security's new bank debt; affirms B1 CFR
No Related Data.
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