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Moody's rates iPayment SGL-2, loans B1, notes Caa1
Moody's Investors Service said it assigned a B2 corporate family rating and SGL-2 speculative grade liquidity rating to iPayment Inc., B1 ratings to its proposed senior secured term loan facility and senior secured revolving credit facility and a Caa1 rating to its proposed senior subordinated notes. The outlook is stable.
Combined proceeds of $735 million are expected finance a management buyout of iPayment and refinance a portion of existing debt.
Moody's said the ratings reflect iPayment's high degree of leverage with debt to EBITDA at 6.5x, its limited track record at current business profile and scale, the rapid growth of the company through acquisitions, the risk of larger and better-capitalized competitors penetrating the small and medium business space and significant reliance on one vendor, which provides the bulk of the transaction processing
The rating also considers the generally favorable macro environment for electronic payment processing industry, iPayment's diverse customer base with no customer concentration by size or sector, the strong recurring nature of its revenue as a result of improving retention rates and the expectation that iPayment will continue to be free cash flow positive despite the significant increase in interest expense due to the buyout, the agency said.
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