Moody’s downgrades Flexera facility

Moody’s Investors Service said it downgraded the rating on Flexera Software LLC’s first-lien senior secured credit facility to B2 from B1.

Flexera plans to issue a $210 million incremental first-lien term loan to fund a $60 million acquisition of a software compliance solutions provider and fully repay $150 million of second-lien debt.

“The proposed transaction is broadly leverage neutral as Moody’s adjusted leverage will increase to 6.8x from 6.7x debt-to-EBITDA, while interest cost savings will be very modest at around $1.5 million annually,” Moody’s said in a press release.

The downgrade of the first-lien senior secured ratings to B2 reflects the change in the mix of debt to an all first-lien secured debt structure. Full repayment of the second-lien debt will remove the loss absorption support to the first-lien credit facilities and consequently weaken the recovery prospects for the first-lien credit facilities in case of a default.

The Caa1 rating on the senior secured second-lien term loan will be withdrawn upon the closing of the transaction if the debt is repaid as expected. Moody’s also affirmed Flexera’s B2 corporate family rating and B2-PD probability of default rating.

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