Moody's lifts ALM Media loan to Caa1, rates loan add-ons B1, Caa1

Moody's Investors Service said it affirmed ALM Media, Inc.'s corporate family and probability-of-default ratings at B3 and its $70 million senior secured first-lien revolving credit facility due 2010 and $218 million senior secured first-lien term loan facility due 2010 at B1 (LGD2, 27%) following the company's announcement that it plans to issue $63 million of unrated super-holding company PIK debt and $12 million of add-on senior secured credit facilities.

The agency assigned a B1 (LGD2, 27%) rating to the $2 million add-on senior secured first-lien term loan facility due 2010, assigned a Caa1 (LGD5, 73%) rating to the $10 million add-on senior secured second-lien term loan facility due 2011 and upgraded the $97 million senior secured second-lien term loan facility due 2011 to Caa1 (LGD5, 73%) from Caa2 (LGD5, 84%).

The outlook is stable.

Proceeds from the proposed incremental debt will be used to make a dividend to ALM Media's parent company.

The agency said the affirmation is largely based upon the company's expectation that despite the significantly increased debt burden resulting from the incremental debt, improved EBITDA performance will return the company's pro forma 9.1x debt-to-EBITDA ratio to around its current level of 7x by the end of 2008. The upgrade of the second-lien term loan results largely from the proposed issuance of super-holding company debt, which Moody's said provides an additional component of junior capital to the company's capital structure.

The ratings are supported by the defensibility of ALM Media's market niche, the reputation and loyal readership of its titles, the diversification of its customer base and a recent improvement in advertising spending by the legal sector, Moody's said.

The ratings also incorporate the company's persistently high leverage profile, the dependence of its business on the U.S. legal services market, its vulnerability to legal advertising spending, its acquisitiveness and its willingness to fund dividends from the proceeds of incremental debt, the agency said.

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