Moody's upgrades Rovi loans

Moody's Investors Service said it affirmed Rovi Corp.'s Ba3 corporate family rating and SGL-2 speculative grade liquidity rating and revised its probability of default rating to Ba3-PD from B1-PD and Rovi Solutions Corp.'s and Rovi Guides, Inc.'s first-lien senior secured credit facilities to Ba2 from Ba3. The outlook remains negative.

The company recently issued $345 million of convertible notes due 2020 (unrated). Moody’s said the change in the rating on the credit facilities reflects the reintroduction of unsecured debt into the company’s capital structure with the issuance of the convertibles.

The affirmation of Rovi's Ba3 corporate family rating reflects the company's recent progress in reducing financial leverage to about 6 times (Moody's adjusted) from about 7 times at the end of September 2013 while sustaining favorable revenue trends within the service provider business segment, generating free cash flow in the mid-teen percentages of debt and maintaining a good liquidity profile, Moody’s said.

The negative outlook continues to reflect Moody's concerns regarding major contract renewals in 2015/2016 with service providers DirecTV, Comcast, Time Warner Cable and Echostar; the company's still elevated financial leverage and the low prospect for meaningfully deleveraging over the near to medium term; and challenges in regards to gaining revenue traction within the consumer electronics segment.

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