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Rating Action:

Moody's upgrades SS&C Technologies CFR to Ba2; outlook stable

01 Jul 2014

Approximately $840 million of long term rated debt affected

New York, July 01, 2014 -- Moody's Investors Service upgraded SS&C Technologies, Inc.'s ("SS&C") corporate family rating ("CFR") to Ba2 from Ba3 and probability of default rating ("PDR") to Ba3-PD from B1-PD. Concurrently, the senior secured credit facility ratings at SS&C and its indirect wholly-owned subsidiary, SS&C Technologies Holdings Europe S.a.r.l. ("SS&C Sarl"), were also upgraded to Ba2 from Ba3. The rating outlook is stable and the speculative grade liquidity rating remains unchanged at SGL-1.

The ratings upgrade reflects SS&C's steady improvements in revenue, EBITDA and free cash flow generation since the 2012 GlobeOp and PORTIA acquisitions ("2012 acquisitions"), as well as the company's subsequent application of excess cash flows towards funded debt repayment. Leverage on a debt to EBITDA basis (Moody's adjusted) has declined to about 2.7 times (for LTM March 2014) from about 5.2 times (pro forma at the time of the 2012 acquisitions). SS&C's revenue base has grown to about $725 million (LTM March 2014) from about $635 million for FY 2011 (pro forma for 2012 acquisitions) as a result of healthy organic growth rates within the company's core business segments. From an overall industry perspective, growth in alternative assets under administration, the increasing complexity of securities products, increased regulatory requirements and investor demand for transparency, as well as a higher propensity of investment and asset management firms to outsource mid and back office operations, support our expectations that SS&C will be able to sustain the improvement in its operating performance.

The following ratings were upgraded:

Issuer: SS&C Technologies, Inc.

Corporate Family Rating to Ba2 from Ba3

Probability of Default Rating to Ba3-PD from B1-PD

$100 million Senior Secured Revolving Credit Facility due 2017 to Ba2 (LGD3, 33%) from Ba3 (LGD3, 34%)

$485 million (outstanding) Senior Secured Term Loan B-1 due 2019 to Ba2 (LGD3, 33%) from Ba3 (LGD3, 34%)

Issuer: SS&C Technologies Holdings Europe S.a.r.l.

$202 million (outstanding) Senior Secured Term Loan A-2 due 2017 to Ba2 (LGD3, 33%) from

Ba3 (LGD3, 34%)

$50 million (outstanding) Senior Secured Term Loan B-2 due 2019 to Ba2 (LGD3, 33%) from

Ba3 (LGD3, 34%)

There was no change to the following:

Issuer: SS&C Technologies, Inc.

Speculative Grade Liquidity Rating at SGL-1

Outlook: Maintained at Stable

RATINGS RATIONALE

SS&C's Ba2 Corporate Family Rating ("CFR") reflects the company's solid market position in the hedge fund administration services market and its enhanced scale following the 2012 acquisitions of GlobeOp and PORTIA. The company's rating is supported by leverage on a debt to EBITDA basis (Moody's adjusted) of about 2.7 times as of the LTM period ended March 31, 2014, as well as the company's demonstrated ability and willingness to reduce funded debt after leveraging events. SS&C's credit profile benefits from the favorable free cash flow characteristics of its business model, as demonstrated by its high levels of contractual, recurring revenues (92% of total LTM revenue as of Q1 2014) and maintenance customer retention rates ( greater than 90% for core enterprise products), along with low capital expenditure requirements. Furthermore, SS&C's ratings are also supported by the high switching costs of its services, as well as deep domain expertise in the financial services sector (gained by providing software enabled outsourcing services), which the company leverages for developing/improving proprietary software, in order to anticipate and meet increasingly complex client requirements.

However, the Ba2 rating also incorporates the company's tolerance for high financial leverage and its acquisitive growth strategy. As a result, over a longer term horizon, we expect deleveraging trends to be punctuated by opportunistic debt-financed acquisitions. The Ba2 rating further reflects SS&C's business risks arising from its dependence and focus on the financial services sector, as well as high revenue concentration in the volatile hedge fund segment of the financial services industry, in addition to an intensely competitive industry environment.

The stable ratings outlook is based on our expectations that SS&C will continue to generate solid operating performance, maintain a very good liquidity profile and sustain its currently strong free cash flow to total debt levels. The rating anticipates that future leverage improvements might be interrupted by moderately sized debt funded acquisitions.

Though unlikely over the near term, SS&C's ratings could be upgraded if the company continues to demonstrate strong organic revenue and earnings growth trends, such that they result in a substantial improvement in the size and scale of the company. A ratings upgrade would also require the company to consistently generate strong free cash flow, and sustain total debt-to-EBITDA leverage below 2.5 times, after accommodating moderate size acquisitions. Moody's could raise SS&C's ratings if management demonstrates a commitment to balanced financial policies and maintains very good liquidity.

Moody's could downgrade SS&C's ratings if weak business execution or increasing competition leads to erosion in EBITDA margins and free cash flow declines to below 15% of total debt for an extended period of time. The ratings could also be downgraded if SS&C's total debt-to-EBITDA leverage sustains above 3.5 times, on an other than temporary basis. In addition, increase in debt to drive shareholder returns or consummate large-sized or transformative acquisitions could potentially trigger a ratings downgrade.

The principal methodology used in this rating was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

On July 1, 2013 and March 10, 2014, Moody's Investors Service assigned Ba3, LGD3 - 34% ratings to two senior secured term loan bank credit facilities (CUSIP s 78466DAP9 and 78466DAQ7 respectively). Due to an internal administrative error, these ratings were assigned under SS&C Technologies, Inc. Moody's has corrected its ratings database to reflect the correct issuer name as SS&C Technologies Holdings Europe S.a.r.l.

Headquartered in Windsor, CT, SS&C provides software products and software-enabled services mainly to customers in the institutional asset management, alternative investment management and financial institutions vertical markets. SS&C reported revenues of about $725 million for the LTM period ended March 31, 2014.

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

Harmandeep S Saggu
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

Alexandra S. Parker
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 upgrades SS&C Technologies CFR to Ba2; outlook stable
No Related Data.
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