Moody's rates Deluxe Entertainment loans B1, B3

Moody's Investors Service assigned a B2 corporate family rating to DX III Holdings Corp., to be renamed Deluxe Entertainment Services Group LLC, and B1 ratings to the proposed $582.5 million first-lien senior secured credit facilities and a B3 rating to the proposed $150 million second-lien facility.

About $607.5 million in proceeds from the transaction, along with $152.5 million of equity from MacAndrews and Forbes Holdings Inc., will be used to finance the acquisition of DX III, the Deluxe film processing and creative services business, from The Rank Group plc (about 3x times purchase price to cash EBITDA, 2005 estimate).

The ratings on DX III reflect its market leadership in the motion picture film processing industry, stable, attractive margins (cash EBITDA margins in excess of 30%) and strong, long-term contractual relationships with the major film studios, the agency said.

These positives are balanced by the cash flow volatility presented by the cash advance contract payments required to secure business and Moody's concerns on the company's ability to predict these cash outflows.

The stable outlook reflects Moody's expectation that DX III will achieve improvements in leverage as the company uses free cash flow to pay down debt.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.