Approximately $3.6 billion of rated debt affected
New York, December 20, 2010 -- Moody's Investors Service today upgraded the Corporate Family Rating
("CFR") of Iron Mountain Incorporated to Ba3 from B1.
Concurrently, the senior secured credit facility rating was raised
to Baa3 from Ba1 and the senior subordinated notes rating was raised to
B1 from B2. The ratings outlook was changed to stable from positive.
Additionally, the SGL-1 liquidity rating was affirmed.
RATINGS RATIONALE
Despite economic weakness over the past few years, Iron Mountain
has continued to report strong operating performance. Organic and
acquired revenue growth, combined with operational efficiencies,
has led to considerable earnings expansion and the deleveraging of the
capital structure. At September 30, 2010, financial
leverage had declined to 3.9 times from 5.1 times at the
end of 2007, using Moody's standard adjustments. A
moderation in capital spending has further contributed to higher free
cash flow (before dividends) and interest coverage. Additionally,
the Ba3 CFR reflects Iron Mountain's very good liquidity profile,
large revenue size, market share, geographic diversity,
and low customer concentration.
The Ba3 rating is constrained by Iron Mountain's shift towards more
shareholder-friendly financial policies. The company initiated
a first-time dividend in early 2010 and recently announced a 200%
increase in the quarterly dividend to approximately $160 million
per year. The higher annual payout rate reduces financial flexibility
and, along with share repurchase programs, makes it unlikely
that Iron Mountain will materially reduce debt in the near term.
The stable ratings outlook incorporates Moody's expectation that
organic revenue will continue to grow modestly in the medium term.
Because of the recent shift in financial policy towards returning capital
to shareholders, cash flow available for debt reduction is expected
to be minimal. As such, an upgrade is unlikely in the near
term. However, the outlook or ratings could be raised if
Iron Mountain continues to reduce leverage through earnings growth or
permanent debt reduction, such that financial leverage is maintained
below 3.5 times and interest coverage exceeds 3.5 times.
A contraction in organic revenue growth, deterioration in earnings
or liquidity, material debt-financed acquisitions,
or further increases in the shareholder payout ratio could lead to negative
ratings pressure. Specifically, the ratings or outlook could
be lowered if financial leverage is sustained above 4.5 times.
Moody's upgraded the following ratings of Iron Mountain Incorporated (and
adjusted the Loss Given Default point estimates, as noted):
Corporate Family Rating, to Ba3 from B1
Probability of Default Rating, to Ba3 from B1
$765 million senior secured revolving credit facility due April
2012, to Baa3 (LGD2, 11%) from Ba1 (LGD2, 14%)
$410 million term loan due 2014, to Baa3 (LGD2, 11%)
from Ba1 (LGD2, 14%)
GBP150 million 7.25% senior subordinated notes due 2014,
to B1 (LGD4, 67%) from B2 (LGD4, 68%)
$233 (formerly $436) million 7.75% senior
subordinated notes due 2015, to B1 (LGD4, 67%) from
B2 (LGD4, 68%)
$317 million 6.625% senior subordinated notes due
2016, to B1 (LGD4, 67%) from B2 (LGD4, 68%)
$200 million 8.75% senior subordinated notes due
2018, to B1 (LGD4, 67%) from B2 (LGD4, 68%)
EUR 225 million 6.75% senior subordinated notes due 2018,
to B1 (LGD4, 67%) from B2 (LGD4, 68%)
$50 million 8% senior subordinated notes due 2018,
to B1 (LGD4, 67%) from B2 (LGD4, 68%)
$300 million 8% senior subordinated notes due 2020,
to B1 (LGD4, 67%) from B2 (LGD4, 68%)
$548 million 8.375% senior subordinated notes due
2021, to B1 (LGD4, 67%) from B2 (LGD4, 68%)
Moody's upgraded the following rating of Iron Mountain Nova Scotia Funding
Company:
C$175 million 7.5% senior subordinated notes due
2017, to B1 (LGD4, 67%) from B2 (LGD4, 68%)
Moody's affirmed the below rating:
Speculative Grade Liquidity Rating, SGL-1
The principal methodologies used in this rating were Global Business &
Consumer Service Industry 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.
Headquartered in Boston, Massachusetts, Iron Mountain is an
international provider of information storage and protection related services.
The company reported revenue of $3.1 billion in the last
twelve months ending September 30, 2010.
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
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 upgrades Iron Mountain's CFR to Ba3 from B1