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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

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Rating Action:

Moody's upgrades Service Corporation CFR to Ba2; rates new revolver Baa2; outlook stable

03 Mar 2011

Approximately $500 million of newly rated debt

New York, March 03, 2011 -- Moody's Investors Service upgraded the Corporate Family Rating and Probability of Default Rating of Service Corporation International (SCI) to Ba2 from Ba3 and assigned a Baa2 its proposed $500 million amended revolving credit facility due 2016. The $500 million revolver due 2016 will replace a $400 million revolver maturing in 2013. Concurrently, Moody's upgraded the senior note ratings to Ba3 from B1 and the speculative grade liquidity rating to SGL-1 from SGL-2. The rating outlook was changed to stable from positive.

Moody's assigned the following ratings (assessments):

$500 million senior unsecured revolver (guaranteed) due 2016, Baa2 (LGD 1, 7%)

Moody's upgraded the following ratings (assessments revised):

$400 million senior unsecured revolver (guaranteed) due 2013, to Baa2 (LGD 1, 7%) from Baa3 (LGD 1, 6%)- rating to be withdrawn upon closing of refinancing

$9 million 7.875% senior unsecured debentures due 2013, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$181 million 7.375% senior unsecured notes due 2014, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$157 million 6.75% senior unsecured notes due 2015, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$213 million 6.75% senior unsecured notes due 2016, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$295 million 7.00% senior unsecured notes due 2017, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$250 million 7.625% senior unsecured notes due 2018, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$250 million senior unsecured notes due 2019, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$150 million 8.0% senior unsecured notes due 2021, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

$200 million 7.5% senior unsecured notes due 2027, to Ba3 (LGD 4, 62%) from B1 (LGD 4, 61%)

Senior unsecured shelf, to (P)Ba3 (LGD 4, 62%) from (P)B1 (LGD 4, 61%)

Corporate Family Rating, to Ba2 from Ba3

Probability of Default Rating, to Ba2 from Ba3

Speculative Grade Liquidity Rating, to SGL-1 from SGL-2

RATINGS RATIONALE

The upgrade of the CFR to Ba2 reflects a track record of steady financial performance through the recent economic downturn and improved results in fiscal 2010, stable cash flow generation and a demonstrated commitment to conservative financial policies. The upgrade of the Speculative Grade Liquidity Rating to SGL-1 reflects significant free cash flow generation, near complete availability under the upsized revolver and solid cushion under financial covenants.

"SCI has expanded its market presence through strategic acquisitions while also investing in its preneed funeral and cemetery operations. Despite pressure from lower funeral volumes, SCI has reduced financial leverage to about 3.7x (reflecting Moody's adjustments) at the end of 2010" says Moody's Senior Vice President Lenny Ajzenman.

The Ba2 CFR reflects the company's leading market position in the North American death care services industry, a geographically diverse portfolio of funeral and cemetery properties, solid financial strength metrics that are in line with the rating category and stable cash flows supported by a large backlog of preneed funeral and cemetery contracts. The ratings are constrained by weak near term funeral volume trends, a steady increase in cremation rates, potential volatility in trust performance and the susceptibility of preneed cemetery sales to a difficult economic climate.

The stable outlook reflects our expectation of modest revenue and profitability growth in 2011 driven by growth in cemetery revenues and the full year impact of acquisitions.

Upward rating momentum could develop if the company demonstrates sustained growth in comparable funeral and cemetery volumes and material improvement in financial strength metrics. Specifically, the ratings could be upgraded if debt to EBITDA and free cash flow to debt are expected to be sustained at about 3.2 times and 15%, respectively.

The ratings could be pressured by a significant and sustained weakening of metrics resulting from (i) a sharp drop in cemetery property sales, funeral volumes, average revenue per funeral or trust income; (ii) an increase in litigation exposure; or (iii) an increase in debt to fund a large acquisition, share repurchase or dividend. If Debt to EBITDA and free cash flow to debt are expected to be sustained at over 4.5 times and less than 7%, a downgrade is possible.

For further details, refer to Moody's Credit Opinion for SCI on Moodys.com.

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.

Service Corporation International (NYSE:SCI) is North America's largest provider of deathcare products and services with revenues of about $2.2 billion in the year ended December 31, 2010. At December 31, 2010, the company operated a network of 1,405 funeral service locations and 381 cemeteries across the US, Canada, and Puerto Rico.

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, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics 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
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Christina Padgett
Senior Vice President
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 Service Corporation CFR to Ba2; rates new revolver Baa2; outlook stable
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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