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Rating Action:

Moody's rates IAC/InterActiveCorp's Match Group senior unsecured notes Ba3; outlook stable

24 May 2016

Approximately $400 million of new debt rated

New York, May 24, 2016 -- Moody's Investors Service assigned a Ba3 rating to the proposed $400 million senior unsecured notes due 2024 to be issued by Match Group, Inc. ("Match"), IAC/InterActiveCorp's ("IAC" or the "company") 85% owned subsidiary that comprises its online dating businesses. Net proceeds from the new notes, which will not be guaranteed by IAC, will be used to retire a like amount of Match's term loan B obligation. The rating outlook is stable.

Rating Assigned:

..Issuer: Match Group, Inc.

$400 Million Senior Unsecured Notes due 2024 -- Ba3 (LGD-4)

The assigned rating is subject to review of final documentation and no material change in the size, terms and conditions of the transaction as advised to Moody's.

RATINGS RATIONALE

IAC's Ba2 Corporate Family Rating (CFR) is supported by its position as one of the largest global Internet and digital media companies with online properties that have established brand names and reasonably long operating histories. The Ba2 rating recognizes IAC's good operating performance driven by a business model which has historically demonstrated respectable online audience reach via search engine analytics, marketing and display advertising, and good, albeit declining, traffic monetization in the Publishing and Applications segments; strong subscriber growth trends in the online dating segment; a disciplined acquisition/investment strategy; and rationalization of underperforming portfolio assets. We expect annual free cash flow in the range of $200 - $300 million and financial leverage, as measured by total debt to EBITDA, in the 3x-4x range (Moody's adjusted). As of March 31, 2016, pro forma leverage was 4.1x (incorporating Moody's standard adjustments and PlentyofFish's LTM EBITDA contribution). We project EBITDA growth to gradually reduce leverage to around 3.5x by the end of 2016. We believe IAC will maintain very good liquidity (SGL-1) supported by a sizable cash position (cash and cash equivalents totaled over $1.2 billion as of March 31st) and revolving credit facilities totaling $800 million, which provide flexibility to pursue strategic growth objectives.

The Ba2 rating also incorporates the inherent risk that Internet businesses could experience a potential decline in website traffic due to rapidly changing technology and industry standards. Alternative means of content delivery as well as shifts in consumer engagement may also contribute to the risk of rapid obsolescence or waning relevance of traditional portal Internet sites. The rating is constrained by IAC's dependence on the partnership with Google and potential changes to Google's search algorithms that could hurt IAC's listings placements. It also reflects the concentrated earnings profile (primarily Match and Applications) and sizeable exposure to digital advertising revenue, which could become more cyclical in the future. IAC's historically aggressive financial policies combined with the large voting stake of Mr. Barry Diller heightens event risk. The Ba2 rating is constrained by the risk of an eventual divestiture of the high margin Match unit that could reduce diversity and scale, and increase IAC's business risk.

Moody's derives Match's debt ratings from IAC's CFR using the Loss Given Default (LGD) Methodology based on our expectation of IAC's continued majority ownership of Match post-IPO. However, if Match were to become a standalone entity or less than majority-owned by IAC, Match's ratings would be de-linked from IAC's CFR and would be based on its standalone creditworthiness. Match's term loan is rated Ba2 as it is secured by capital stock of Match's material domestic subsidiaries and benefits from upstream guarantees. The term loan would likely experience a deficiency claim in a distressed scenario given that we estimate the asset value at Match would be insufficient to fully repay the credit facilities, which caps the term loan rating at the CFR. Match's unsecured notes are rated Ba3 as they do not benefit from upstream guarantees nor a security interest in collateral. Though the proposed transaction will reduce secured term loan debt and increase unsecured debt by a like amount, ratings and LGD assessments on the existing debt instruments remain unchanged under our LGD framework.

Rating Outlook

The stable rating outlook reflects our expectations that IAC will continue to at least maintain its market positions in the Applications and Publishing segments, grow its Match, HomeAdvisor and Video segments, and experience a reasonable amount of subscriber churn in its Internet portfolio. The stable outlook incorporates our expectation that IAC will continue to maintain a consolidated EBITDA margin of at least 14% (Moody's adjusted), generate positive free cash flow, retain a sizeable cash balance and sustain a somewhat conservative capital structure as it pursues strategic growth objectives.

What Could Change the Rating - Up

Ratings could be upgraded if IAC maintains a majority ownership and leading market share in Match, improves the market positions and viability of Applications and Publishing and expands business diversification by increasing the scale and profitability of the HomeAdvisor and Video segments. We could also consider an upgrade to the extent we expect IAC to: (i) demonstrate margin expansion with increasing revenue that is in line or ahead of market growth; (ii) minimize operating losses in the Media segment; and (iii) maintain a net cash position with Moody's adjusted total debt to EBITDA sustained below 3x. An important consideration for an upgrade would be adherence to conservative financial policies with regard to share purchases and dividends.

What Could Change the Rating - Down

Ratings could be downgraded if a spin-off of one or more segments resulted in increased business risk or IAC's competitive position weakens materially as evidenced by revenue declines of 5% or more, adjusted EBITDA margins below 12%, rising traffic acquisition costs or increasing customer churn. Downward pressure could also materialize if financial leverage as measured by Moody's adjusted total debt to EBITDA is sustained over 4x or IAC's liquidity position were to deteriorate significantly due to lower free cash flow generation, higher share purchases or increased acquisition activity.

Moody's subscribers can find additional information in the IAC/InterActiveCorp credit opinion on www.moodys.com.

The principal methodology used in this rating was the Global Broadcast and Advertising Related Industries Methodology published in May 2012. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in New York , N.Y., IAC/InterActiveCorp is a leading media and online company that owns various Internet-based brands and products including: Ask.com (search engine); About.com, Dictionary.com, Investopedia.com (online content and reference libraries), Ask.fm (social) and Apalon (mobile applications); Match Group, Inc. (online dating assets, including Match, Tinder and OkCupid; and non-dating asset, The Princeton Review); HomeAdvisor, ShoeBuy (e-commerce); Vimeo (video); and several other consumer-related applications and portals. Revenue totaled approximately $3.3 billion for the twelve months ended March 31, 2016.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Gregory A. Fraser
Vice President - Senior Analyst
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.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates IAC/InterActiveCorp's Match Group senior unsecured notes Ba3; outlook stable
No Related Data.
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