Moody's rates Herff Jones loans Ba3

Moody's Investors Service said it assigned a Ba3 corporate family rating and a B1 probability-of-default rating to Herff Jones, Inc. following its mostly debt-financed acquisition of American Achievement Corp. for $710 million, including $190 million in cash.

The agency also assigned Ba3 ratings (LGD3, 35.72%) to the company's $735 million in senior secured credit facilities, comprising a $100 million senior secured revolving credit facility and $635 million in A and B term loans.

Proceeds will be used to fund $75 million in accrued compensation under management incentive plans.

Herff Jones' Ba3 corporate family rating reflects the limited growth prospects, seasonality, integration challenges and sizable cash demands driven by the mostly debt-financed acquisition and employee stock ownership plan repurchase obligations, the agency said.

These risks are balanced by the significant market position of the combined businesses, the benefits of combining two experienced management teams and synergies associated with the combination, the agency noted.

The companies' historic operating performance reflects relatively stable revenue with high customer retention rates, modest vulnerability to economic cycles and attractive operating margins, Moody's said.

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