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Rating Action:

Moody's upgrades Dun & Bradstreet's CFR to B2, outlook stable

16 Jul 2020

New York, July 16, 2020 -- Moody's Investors Service ("Moody's") upgraded The Dun & Bradstreet Corporation's ("DNB") corporate family rating (CFR) to B2 from B3 and upgraded the company's probability of default rating ("PDR") to B2-PD from B3-PD. Concurrently, Moody's upgraded the company's senior secured bank facility and senior secured notes to B1 from B2 as well as its senior unsecured notes to Caa1 from Caa2. Moody's also assigned a speculative grade liquidity ("SGL") rating of SGL-2. The rating action follows DNB's repayment of its outstanding preferred stock and a portion of its unsecured notes with a majority of the $2.4 billion in proceeds from its recent IPO. The reduction in trailing Debt/EBITDA (Moody's adjusted) of more than 2x to under 6x on a post transaction basis was a key factor in the upgrade. The outlook is stable.

Upgrades:

..Issuer: Dun & Bradstreet Corporation (The)

.... Corporate Family Rating, Upgraded to B2 from B3

.... Probability of Default Rating, Upgraded to B2-PD from B3-PD

....Gtd Senior Secured 1st Lien Term Loan, Upgraded to B1 (LGD3) from B2 (LGD3)

....Gtd Senior Secured Revolving Credit Facility, Upgraded to B1 (LGD3) from B2 (LGD3)

....Gtd Senior Secured Global Notes, Upgraded to B1 (LGD3) from B2 (LGD3)

....Gtd Senior Unsecured Global Notes, Upgraded to Caa1 (LGD6) from Caa2 (LGD6)

Assignments:

..Issuer: Dun & Bradstreet Corporation (The)

.... Speculative Grade Liquidity Rating, Assigned SGL-2

Outlook Actions:

..Issuer: Dun & Bradstreet Corporation (The)

....Outlook, Remains Stable

RATINGS RATIONALE

DNB's B2 CFR is constrained by the company's high, but more manageable closing LTM debt leverage of nearly 6x (Moody's adjusted for operating leases and pension obligations) as well as its concentrated equity ownership and board structure which presents concerns related to corporate governance and aggressive financial policies including the potential for debt financed acquisitions. DNB's credit quality is also negatively impacted by the highly competitive market in which the company operates. Established peers with lower costs and larger scale and new entrants capitalizing on technological innovation contribute to pricing pressure and threaten DNB's market position.

The rapid spread of the coronavirus outbreak, deteriorating global economic outlook, low oil prices, and high asset price volatility have created an unprecedented credit shock across a range of sectors and regions. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial credit implications of public health and safety. The pandemic has created business challenges and pressured capital expenditure budgets throughout DNB's client base and the company's vulnerability to shifts in market demand and sentiment in these unprecedented operating conditions weigh on its credit quality.

These risks are partially offset by DNB's very long operating history, strong brand recognition within its target markets, and established long-term relationships with a diverse and large number of customers. Additionally, the company's credit quality is supported by a largely subscription-oriented sales model that provides a relatively predictable revenue base while ongoing cost reduction initiatives drive gradual margin expansion and improved free cash flow generation.

The B1 ratings on DNB's bank facility and senior secured notes reflect the borrower's B2-PD PDR and a loss given default ("LGD") assessment of LGD3. These debt instruments are rated one notch above the CFR given their priority in the collateral and senior ranking in the capital structure relative to the company's senior unsecured notes rated Caa1 (LGD6). However, following the partial repayment of the 10.25% notes, unsecured debt accounts for a lesser proportion of DNB's overall debt structure, providing more limited first loss support to the company's secured debt ratings.

DNB's liquidity is good, as indicated by the SGL-2 rating. Liquidity is principally supported by pro forma cash and cash equivalents that approximate nearly $700 million following the completion of the IPO and net of subsequent debt repayments. Liquidity is also supported by our expectation of positive operating cash flows , and free cash flow as a percentage of total adjusted debt of around 5% in 2020. The company's liquidity is further bolstered by limited dependence on a largely undrawn (pro forma) $400 million revolving credit facility. While DNB's term loans are not subject to financial covenants, the revolving credit facility has a springing covenant based on a maximum net first lien leverage ratio of 6.75x which the company should be comfortably in compliance with over the next 12-18 months.

The stable outlook reflects Moody's expectation that DNB's revenues and EBITDA are likely to increase modestly over the next 12-18 months, with debt leverage (Moody's adjusted) approaching 5.5x by the end of 2021.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The rating could be upgraded if DNB generates healthy revenue growth and profitability while adhering to a conservative financial policy such that debt/EBITDA (Moody's adjusted) is sustained below 4.5x and annual free cash flow/debt approaches 10%.

The rating could be downgraded if DNB's operating performance and free cash flow decline materially or if the company adopts more aggressive financial policies such that debt/EBITDA (Moody's adjusted) exceeds 6.5x on a sustained basis.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

DNB, founded in 1841 and headquartered in Short Hills, New Jersey, is a global leader in trade credit and commercial data and analytic products used by businesses across most industries to improve their business performance. The company's equity ownership is largely concentrated among private equity investors and Black Knight, Inc. ("BKI") which provides workflow automation and data and analytics to the mortgage industry. Moody's expects revenues in 2020 to approach $1.8 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Lee Zeltser
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Karen Nickerson
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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