Moody's rates RGIS Holdings loans B1

Moody's Investors Service said it assigned B1 ratings to the first-lien credit facilities of RGIS Holdings LLC, which include a $70 million senior secured first-lien revolving credit facility due 2011, a $300 million senior secured first-lien term loan B due 2013 and $200 million in preferred limited-liability company interests.

This facility replaces the original proposal for a facility including a $70 million revolver, $350 million term loan and $150 million second-lien term loan, which was to be rated B2.

The outlook is stable.

Moody's said RGIS restructured the transaction in response to lower-than-expected results for the third quarter and fiscal year ended Dec. 31 due to adverse developments in its merchandising services business and a delay in the commencement of work for some international clients.

Given the consequent lower expectations for growth of revenue and profitability, the proposed transaction was restructured, reducing the dividend recapitalization from $500 million to $300 million and thereby providing a lower level of funded debt.

The $200 million difference is being offset by a preferred equity instrument, which does not pay a cash dividend but accrues value at the rate of 8% per year. The holder has a redemption right that could be exercised (or not) in March 2008, requiring the firm to pay the holder $200 million plus accrued preferred interest yield. Moody's noted that if the company fails to redeem all of the outstanding preferred interests in response to an exercise of the redemption right, the holder could force the sale of the company.

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