Moody’s assigns Virtusa B3

Moody’s Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to Austin Holdco Inc. (Virtusa Corp.).

Concurrently, Moody’s assigned B2 ratings to the company’s proposed $125 million senior secured first-lien revolver due 2025 and $600 million senior secured first-lien term loan due 2027. Moody’s also assigned a Caa2 rating to the company’s proposed $300 million senior unsecured notes due 2028.

Proceeds combined with new equity from Baring Private Equity Asia will be used to take Virtusa private for an equity transaction value of nearly $1.8 billion, plus the repayment of debt and payment of related fees and expenses. The new $125 million revolver is expected to remain undrawn at closing.

“Virtusa’s overall size, leverage profile and free cash flow generating ability position the company well within the broad B3 rating category,” said Andrew MacDonald, Moody’s lead analyst for the company, in a press release. “The ratings incorporate Virtusa’s position in the rapidly growing digital transformation space that we believe supports robust long term revenue growth. Nonetheless, the coronavirus pandemic will likely result in earnings volatility during the next 12 to 18 months as customers adapt IT budgets amid the pandemic.”

The outlook is stable. The outlook reflects the expectation Virtusa will resume positive revenue growth in the mid-single-digit percentages and EBITDA margins will be maintained at about 11%, Moody’s said.

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