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Rating Action: Moody's rates combined Infor and Lawson entity B2
Global Credit Research - 16 Mar 2012
Approximately $5.2 billion in debt affected
New York, March 16, 2012 -- Moody's Investors Service assigned a B2 corporate family rating to the merged Infor Global Solutions Inc. and Lawson Software Inc. entity pending closing of the transaction. Moody's also assigned Ba3 ratings to the senior secured revolver and term loans and Caa1 to senior unsecured notes used to finance the transaction. The loans will be used along with an additional $550 million of new equity being contributed by private equity owners, Golden Gate Capital and Summit Partners, rolled over Lawson senior unsecured notes due 2019 and amended and extended Infor Global Solutions Holdings Ltd PIK unsecured notes to finance the transaction. The ratings outlook is stable.
RATINGS RATIONALE
The B2 corporate family rating is primarily driven by the high leverage pro forma for the financing of the combined companies (est. 6.7x debt/EBITDA as of LTM November 2011 pro forma for cost saving achieved to date and certain other one time expenses) and is considered weakly positioned in the B2 category. The ratings, however also reflect the leading mid market position in the enterprise software industry of the combined companies, stability of maintenance revenues (which represent over 50% of revenues) and large degree of integration and restructuring already completed at the two companies, without which the ratings would be lower. The industry remains very competitive however, and though revenues are expected to exceed $2.8 billion on a pro forma basis, the company remains small compared to its much larger, much better capitalized competitors, Oracle and SAP AG. We view having a strong capital structure and the resulting financial flexibility to make acquisitions to be critical given the evolving nature of the enterprise software industry. The enterprise software industry is changing rapidly to incorporate cloud based delivery and while Infor and Lawson both offer products on a SaaS basis, new competitors are quickly making inroads with their designed from the ground up cloud offerings.
The stable ratings outlook reflects our expectation that EBITDA will improve over the next 12 to 18 months and that leverage will decline modestly. Debt levels are however expected to remain high absent a public equity offering. The ratings could be downgraded if the integration falters or revenues and EBITDA decline more than modestly. Given the high leverage, a ratings upgrade is unlikely in the near to medium term.
The following ratings will be assigned pending closing of the transaction:
Corporate family rating: B2
Probability of default: B2
$3.1 billion Senior Secured Term Loan B: Ba3, LGD3, 30%
$400 million Senior Secured Term Loan B-1: Ba3, LGD3, 30%
$1.15 billion Senior Unsecured Notes due 2019: Caa1, LGD5 82%
The following rating will be affirmed pending closing of the transaction:
$560 million existing Lawson Senior Unsecured Notes due 2019: Caa1, LGD5 82%
Ratings outlook: stable
At closing of the transaction, all Infor ratings and existing debt instrument ratings at Lawson will be withdrawn, with the exception of the $560 million Lawson Senior Unsecured Notes due 2019. All new ratings are expected to be assigned under GGC Software Holdings, Inc. the current parent of Lawson Software, Inc.
The principal methodology used in rating Lawson was the Global Software Industry Methodology published in May 2009. 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 Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of these methodologies.
The combined Infor and Lawson entity will have pro forma combined revenues of approximately $2.8 billion and will be headquartered in Alpharetta, GA.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on Moody's - credit ratings, research, tools and analysis for the global capital markets.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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 Moody's - credit ratings, research, tools and analysis for the global capital markets.
Information sources used to prepare the 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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a 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 the ratings disclosure page on Moody's - credit ratings, research, tools and analysis for the global capital markets for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on Moody's - credit ratings, research, tools and analysis for the global capital markets for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on Moody's - credit ratings, research, tools and analysis for the global capital markets for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on Moody's - credit ratings, research, tools and analysis for the global capital markets for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 Moody's - credit ratings, research, tools and analysis for the global capital markets for further information.
Rating Action: Moody's rates combined Infor and Lawson entity B2
Global Credit Research - 16 Mar 2012
Approximately $5.2 billion in debt affected
New York, March 16, 2012 -- Moody's Investors Service assigned a B2 corporate family rating to the merged Infor Global Solutions Inc. and Lawson Software Inc. entity pending closing of the transaction. Moody's also assigned Ba3 ratings to the senior secured revolver and term loans and Caa1 to senior unsecured notes used to finance the transaction. The loans will be used along with an additional $550 million of new equity being contributed by private equity owners, Golden Gate Capital and Summit Partners, rolled over Lawson senior unsecured notes due 2019 and amended and extended Infor Global Solutions Holdings Ltd PIK unsecured notes to finance the transaction. The ratings outlook is stable.
RATINGS RATIONALE
The B2 corporate family rating is primarily driven by the high leverage pro forma for the financing of the combined companies (est. 6.7x debt/EBITDA as of LTM November 2011 pro forma for cost saving achieved to date and certain other one time expenses) and is considered weakly positioned in the B2 category. The ratings, however also reflect the leading mid market position in the enterprise software industry of the combined companies, stability of maintenance revenues (which represent over 50% of revenues) and large degree of integration and restructuring already completed at the two companies, without which the ratings would be lower. The industry remains very competitive however, and though revenues are expected to exceed $2.8 billion on a pro forma basis, the company remains small compared to its much larger, much better capitalized competitors, Oracle and SAP AG. We view having a strong capital structure and the resulting financial flexibility to make acquisitions to be critical given the evolving nature of the enterprise software industry. The enterprise software industry is changing rapidly to incorporate cloud based delivery and while Infor and Lawson both offer products on a SaaS basis, new competitors are quickly making inroads with their designed from the ground up cloud offerings.
The stable ratings outlook reflects our expectation that EBITDA will improve over the next 12 to 18 months and that leverage will decline modestly. Debt levels are however expected to remain high absent a public equity offering. The ratings could be downgraded if the integration falters or revenues and EBITDA decline more than modestly. Given the high leverage, a ratings upgrade is unlikely in the near to medium term.
The following ratings will be assigned pending closing of the transaction:
Corporate family rating: B2
Probability of default: B2
$3.1 billion Senior Secured Term Loan B: Ba3, LGD3, 30%
$400 million Senior Secured Term Loan B-1: Ba3, LGD3, 30%
$1.15 billion Senior Unsecured Notes due 2019: Caa1, LGD5 82%
The following rating will be affirmed pending closing of the transaction:
$560 million existing Lawson Senior Unsecured Notes due 2019: Caa1, LGD5 82%
Ratings outlook: stable
At closing of the transaction, all Infor ratings and existing debt instrument ratings at Lawson will be withdrawn, with the exception of the $560 million Lawson Senior Unsecured Notes due 2019. All new ratings are expected to be assigned under GGC Software Holdings, Inc. the current parent of Lawson Software, Inc.
The principal methodology used in rating Lawson was the Global Software Industry Methodology published in May 2009. 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 Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of these methodologies.
The combined Infor and Lawson entity will have pro forma combined revenues of approximately $2.8 billion and will be headquartered in Alpharetta, GA.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on Moody's - credit ratings, research, tools and analysis for the global capital markets.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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 Moody's - credit ratings, research, tools and analysis for the global capital markets.
Information sources used to prepare the 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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a 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 the ratings disclosure page on Moody's - credit ratings, research, tools and analysis for the global capital markets for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on Moody's - credit ratings, research, tools and analysis for the global capital markets for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on Moody's - credit ratings, research, tools and analysis for the global capital markets for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on Moody's - credit ratings, research, tools and analysis for the global capital markets for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 Moody's - credit ratings, research, tools and analysis for the global capital markets for further information.
