Moody's raises, drops Deluxe notes

Moody's Investors Service said it upgraded the rating for Deluxe Corp.'s $200 million of 7 3/8% senior unsecured notes due 2015 to Ba1 (LGD2, 24%) from Ba2 (LGD4, 54%) due to the enhanced support structure and correspondingly improved loss given default assumption.

Noteholders now benefit from a pari passu guaranty of Deluxe's material subsidiaries that went into effect following the company's execution of a new $200 million senior secured revolving credit facility that also is guaranteed by those subsidiaries.

Moody's also said it downgraded Deluxe's $280 million of 5% senior unsecured notes due 2012 and $264 million of 5 1/8% senior unsecured notes due 2014 to Ba3 (LGD5, 73%) from Ba2 (LGD4, 54%) based on worsening loss given default expectations. These notes now rank at the bottom of the recovery waterfall in the company's capital structure as they do not enjoy the benefit of security interests or subsidiary guarantees, the agency said.

The ratings reflect ongoing pressure on the company's revenue base and operating margins, Moody's said, and execution risks associated with its strategy to expand the small business services segment.

The agency said it believes the continued revenue pressure elevates event risk and necessitates that Deluxe maintain a more conservative leverage profile than comparably-rated issuers.

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