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Rating Action: Moody's lowers Stream's Speculative Grade Liquidity rating to SGL-3; Rates add-on notes B1
Global Credit Research - 08 Mar 2013
Approximately $230 million of long-term debt affected
New York, March 08, 2013 -- Moody's Investors Service lowered the Speculative Grade Liquidity rating of Stream Global Services, Inc ("Stream") to SGL-3 from SGL-2. At the same time, Moody's assigned a B1 rating to the company's proposed add-on offering of $30 million senior notes due October 2014. The new notes are an add-on to the existing $200 million note offering in 2009. In addition, Moody's affirmed Stream's B1 Corporate Family Rating and changed the Probability of Default Rating to B1-PD from B2-PD. The ratings outlook remains stable.
Proceeds from the proposed add-on notes offering are expected to be used to repay a portion of the outstanding borrowings under the ABL revolving credit facility. In February 2013, Stream acquired LBM Holdings Limited ("LBM") for a purchase price of GBP 29 million (approximately $44 million). LBM is a United Kingdom based BPO provider servicing multinational companies in the utilities, telecommunications and financial services sectors primarily in the UK marketplace. The acquisition was funded through Stream's recently amended and expanded $125 million asset based lending ("ABL") revolving credit facility. The ABL facility matures on the earlier of (1) 120 days prior to the maturity date of the senior secured notes (including any refinancing or extension of the notes) or (2) December 27, 2017.
The revision of the Speculative Grade Liquidity rating to SGL-3 reflects the company's diminished (albeit still adequate) liquidity profile, and is largely due to the significant maturity of the $125 million ABL revolver, which could happen as early as June 2014, unless the $230 million secured notes (inclusive of the proposed $30 million add-on) due October 2014 are refinanced. As noted previously, the ABL facility matures on the earlier of (1) 120 days prior to the maturity date of the senior secured notes (including any refinancing or extension of the notes) or (2) December 27, 2017. Moody's believes that the company's projected liquidity position over the next twelve to eighteen months does not afford enough capacity to repay both the outstanding amounts under the ABL revolver and the $230 million secured notes.
The ratings affirmation reflects Moody's view that the incremental debt from the LBM acquisition does not materially change Stream's credit profile. Furthermore, the proposed add-on notes offering in combination with the December 2012 ABL revolver amendment improves "post-LBM acquisition" financial flexibility by increasing availability under the ABL revolver.
Moody's also revised Stream's Probability of Default Rating ("PDR") to B1-PD from B2-PD reflecting the expectation of an average overall family recovery rate of 50% in the event of default (as per Moody's Loss Given Default Methodology). In October 2012, the company's PDR was changed to B2-PD as a result of a proposed refinancing transaction, which would have resulted in an all bank 1st lien capital structure, reflecting an overall 65% family recovery rate. However, the proposed 2012 refinancing transaction was not consummated due to market conditions, and as a result, the PDR has been revised back to B1-PD to reflect the present capital structure. In addition, Moody's has withdrawn the Ba3 ratings (assigned as part of the proposed 2012 refinancing transaction) on Stream's proposed $65 million revolving credit facility due 2017, $290 million senior secured term loan B due 2019 and $45 million delayed draw senior secured term loan due 2019.
Rating assigned:
Proposed $30 million add-on senior secured notes due 2014 at B1 (LGD4, 57%)
Ratings affirmed and LGD point estimates updated include:
Corporate family rating at B1
$200 million senior secured notes due 2014 at B1 (LGD4, 57%) from B1 (LGD4, 54%)
Ratings changed:
Speculative Grade Liquidity Rating to SGL-3 from SGL-2
Probability of Default rating to B1-PD from B2-PD
Ratings withdrawn:
$65 million senior secured revolving credit facility due 2017, rated Ba3 (LGD2, 26%)
$290 million senior secured term loan B due 2019, rated Ba3 (LGD2, 26%)
$45 million delayed draw senior secured term loan due 2019, rated Ba3 (LGD2, 26%)
RATINGS RATIONALE
Stream's B1 corporate family rating reflects expectation that debt to EBITDA (Moody's Adjusted) will sustain below 3.5 times and EBITDA less capex to interest will be close to 2.0 times over the next 12 to 18 months based on EBITDA growth and some debt reduction. The rating also considers Stream's demonstrated ability to expand its EBITDA margins, expectations for further margin improvement, its business position as a leading player among a handful of top providers specializing in the customer relationship management("CRM") segment of the highly fragmented business process outsourcing ("BPO") industry, and long-standing relationships with leading technology companies like Dell, Hewlett-Packard and Microsoft. The rating, however, is constrained by the company's relatively small-scale within the fragmented business process outsourcing industry, expectations for only modest free cash flow generation and material customer concentration. The rating also captures the potential for debt funded bolt-on acquisitions as the company seeks to expand into new geographies and industry verticals.
The SGL-3 speculative grade liquidity rating reflects our expectation that Stream will maintain an adequate pro forma liquidity profile over the next twelve months characterized by modestly positive free cash flow. In the event that the senior secured notes are not refinanced and the ABL matures 120 days before the scheduled October 2014 maturity of the notes i.e. June 2014, Moody's believes that the company's projected liquidity position over this time period does not afford enough capacity to completely repay outstanding amounts under the ABL revolver.
The stable outlook reflects Moody's expectation that Stream will continue to improve its operating performance, maintain its existing customer base, and win new business by leveraging its increased scale and geographic reach.
Moody's could upgrade Stream's ratings if it reduces debt to EBITDA on a sustained basis below 3.0 times, EBITDA less capex to interest approaches 2.5 times, and free cash flow as a percentage of debt increases above 8%. An upgrade would also require that Stream reduce its customer concentration and continue to expand its topline and operating margin through client expansion and operating efficiencies.
Moody's could downgrade Stream's ratings if debt to EBITDA increases above 4.5 times and/or if EBITDA less capex to interest expense falls below 1.5 times on a sustained basis. The ratings could also be downgraded if Stream's liquidity profile deteriorates or if the company incurs customer losses leading to sustained margin compression and/or a decline in operating earnings and cash flow. A material debt-financed acquisition could also pressure the ratings.
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 Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of these methodologies.
Stream Global Services, Inc., headquartered in Wellesley, Massachusetts, is a global provider of CRM and other BPO services to companies in the technology, telecommunications, software, networking and media industries. The company reported revenues of approximately $860 million for the fiscal year ended December 31, 2012.
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 Moody's - credit ratings, research, tools and analysis for the global capital markets.
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.
Please see Moody's - credit ratings, research, tools and analysis for the global capital markets 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 Moody's - credit ratings, research, tools and analysis for the global capital markets 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
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Hobbit64
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rivetto
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caro rivetto puoi specificare meglio per favore.
tu le hai prese con un riparto?
a me ne hanno date 0 su 320 k richiesti perchè mi hanno detto che sono andate a sorteggio
come dice Andreotti (romano come me) a pensare male si fa peccato ma spesso ci si indovina sta storia del sorteggio mi è parsa una presa per il
bisogna riconsiderare i rapporti di PB tu con chi fai le operazioni?
Ciao il taglio era 100k e le richieste circa 6 volte l'offerta: forte riparto!!
McGraw-Hill che esce a questi tassi.... Come è possibile, cosa mi sono perso?
Standard and poors is a division of McGraw-Hill........!!!!!!
ciao
credevo anch'io fosse la società che controlla S&P ma non è così
sto cercando info ma sin ora nulla
drbs315
Forumer storico
Sono forse questi qui?
McGraw-Hill Education
Da Bloomb sembrerebbe di sì
McGraw-Hill Education Sells $800 Million of Debt for Apollo Deal - Bloomberg
Praticamente a ripago del lbo, sembrerebbe il passaggio di mano del cerino, a occhio meglio scappare a gambe levate... (solo impressione)
Ultima modifica:
Mi sembrava strano... anche se il nome è quello!!!!!