Moody’s rates TouchTunes loans B1, Caa1

Moody’s Investors Service said it assigned first-time B2 corporate family rating and B2-PD probability of default rating to TouchTunes Interactive Networks, Inc.

The agency also said it assigned a B1 (LGD 3) rating to the proposed first-lien credit facilities, consisting of a $170 million senior secured term loan due 2021 and $25 million senior secured revolving credit facility due 2020.

Moody’s also assigned a Caa1 (LGD 5) rating to the $62.5 million second-lien senior secured term loan due 2022.

The outlook is stable.

The proceeds from the new credit facilities, plus common equity from funds managed by Searchlight Capital Partners, LP, will be used to finance the leveraged buyout of TouchTunes, Moody’s said.

The company’s Tanjarine subsidiary is not being acquired, the agency said.

The ratings reflect the company’s small revenue base and high pro forma financial leverage of about 6x as of December 2014, Moody’s said.

The ratings also consider its concentrated revenue exposure to the cyclical consumer discretionary segment, potential aggressive pricing from deep-pocketed competitors and ownership by a private equity sponsor, the agency said.

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