$230 million of newly rated debt
New York, February 23, 2011 -- Moody's Investors Service today assigned a B1 rating to TravelCLICK,
Inc.'s ("TravelCLICK") proposed $230 million senior secured
credit facility. Concurrently, the B1 Corporate Family Rating
("CFR") was affirmed. The ratings outlook remains stable.
TravelCLICK has announced it is under exclusivity to acquire a competitor
in its Business Intelligence segment. In conjunction with the acquisition,
TravelCLICK is seeking to refinance its entire capital structure.
The proposed $230 million senior secured credit facility will be
comprised of a $20 million revolver (expected to be undrawn at
close), a $160 million term loan and a $50 million
delayed draw term loan (also expected to be undrawn at close).
Proceeds of the term loan, along with cash on hand and rollover
equity, will be used to fund the acquisition, refinance existing
debt of $118 million, and finance certain fees and expenses.
RATINGS RATIONALE
TravelCLICK's B1 CFR incorporates its relatively stable performance
during the recession, Moody's positive outlook on the U.S.
lodging industry, and an expectation that the company's liquidity
profile should remain adequate throughout the near term. Contrary
to fluctuating trends in the hotel industry, TravelCLICK has reported
fairly stable consolidated revenues and earnings over the past couple
years. Notably, an industry-wide trend towards a greater
percentage of bookings made directly on hotel websites benefited TravelCLICK's
overall reservation system volumes and partially offset the negative impact
of customers' lower average occupancy and average room rates. TravelCLICK
continues to benefit from a diverse product offering, low customer
concentration and considerable geographic diversity.
Nonetheless, the proposed transaction will increase financial leverage
by nearly one turn to approximately 4.5 times on a pro forma basis
as of September 30, 2010, using Moody's standard adjustments.
Capital and overhead spending needed to integrate and expand technology
and sales platforms is expected to weaken margins, cash flow and
interest coverage metrics in 2011. Furthermore, the committed
delayed draw term loan signals the potential for additional debt-financed
acquisitions and a generally more aggressive financial policy.
The B1 CFR continues to be constrained by the company's relatively modest
revenue size, reliance on strategic partners, and the vulnerability
of revenues to highly cyclical demand within the luxury and upper upscale
hotel industry.
The stable outlook reflects Moody's expectations that the proposed acquisition
will be successfully integrated in a timely manner and TravelCLICK will
modestly grow revenue in the near-term as end market demand continues
to rebound, particularly within the business traveler segment.
Due to TravelCLICK's relatively modest size, it is unlikely the
CFR will be upgraded in the near term. However, the ratings
or outlook could be raised if TravelCLICK significantly expands its revenue
base and permanently reduces indebtedness such that financial leverage
and free cash flow to debt can be sustained at about 3 times and above
10%, respectively. The outlook or ratings could be
pressured if there are additional debt-funded acquisitions or other
material changes in TravelCLICK's capital structure or strategic alliances,
or if the company's profitability or liquidity profile deteriorates.
Specifically, financial leverage and interest coverage above 5 times
and below 1.7 times, respectively, could lead to a
downgrade.
Moody's assigned the following ratings (and LGD assessments) to TravelCLICK,
Inc.:
$20 million proposed senior secured revolver due 2016, B1(LGD3,
30%)
$160 million proposed senior secured term loan B due 2016,
B1 (LGD3, 30%)
$50 million proposed senior secured delayed draw term loan due
2016, B1 (LGD3, 30%)
Moody's affirmed the below ratings:
Corporate Family Rating, B1
$15 million senior secured revolver due December 2012, Ba2
(LGD2, 29%) -- rating to be withdrawn upon closing of
transaction
$78 million senior secured term loan due December 2013, Ba2
(LGD2, 29%) - rating to be withdrawn upon closing
of transaction
Moody's lowered the below rating:
Probability of Default Rating, to B2 from B1
For further information, refer to the Credit Opinion to be published
on moodys.com. The ratings are subject to Moody's review
of final documentation.
The principal methodologies used in this rating were Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009, and Global Business &
Consumer Service Industry Rating Methodology published in October 2010.
TravelCLICK Holdings, Inc. is a leading provider of marketing
and reservation services to independent and chain hotels worldwide.
Headquartered in New York City, pro forma 2010 revenues are estimated
at approximately $200 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
Kendra M. Smith
MD - Corporate Finance
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 TravelCLICK's proposed bank debt B1; affirms B1 CFR
