Moody's changes Deluxe outlook to positive

Moody's Investors Service said it changed Deluxe Corp.'s outlook to positive from stable and affirmed the company's corporate family rating at Ba2, probability of default rating at Ba2-PD, speculative grade liquidity rating at SGL-2, $253.5 million 5 1/8% senior notes due Oct. 1, 2014 at B1 (LGD5, 88%) and $200 million 7% senior notes due 2019 and $200 million senior notes due 2020 at Ba2 (LGD3, 47%).

The agency said the change in outlook reflects the stability of operations despite the secular pressure on Deluxe's check business, which allows for good EBITDA margins and strong free cash flow. In addition, the potential for the $254 million senior notes maturing in October 2014 to be repaid with a combination of cash on hand and a revolver draw would reduce leverage to below 1.5 times from 1.8 times at the end of 2013, Moody's added.

Deluxe's Ba2 corporate family rating reflects ongoing pressure on the company's checks business, the commodity nature of its forms business and the competitive environment in these industries, Moody's said, and Deluxe faces execution risks associated with its strategy to further diversify the business into marketing solutions and other services.

The agency said the ratings derive strength from the conservative financial policies of the company, which have led to reduced debt levels and increased free cash flow as a percentage of debt to almost 25%; strong market position; growth in its small business services segment; stable EBITDA margin; and its track record of successfully integrating acquisitions.

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