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Moody’s rates OverDrive, loans B2
Moody's Investors Service said it assigned to Aragorn Parent Corp. (OverDrive) a B2 corporate family rating, a B2-PD probability of default rating and B2 ratings to the backed senior secured first-lien credit facilities consisting of a $70 million revolving credit facility due February 2025 and a $597 million term loan B due August 2025. The outlook is stable.
Concurrently, the agency said it withdrew Recorded Books Inc.'s (RBmedia) ratings including its B3 CFR, B3-PD PDR and B3 ratings on the senior secured first-lien credit facilities in which the co-borrowers were Recorded Books, a direct wholly-owned subsidiary of Gimli Holdings and Aragorn Parent, a direct wholly-owned subsidiary of Aragorn Holding Corp. Moody’s withdrew the stable outlook. The withdrawal of the credit ratings follows KKR's sale of RBmedia to H.I.G Capital which closed in August.
“Aragorn Parent Corp.'s (dba OverDrive) credit profile reflects moderate operating scale, narrow product focus, and elevated financial leverage under private equity ownership. While the company serves a diverse client segment, public libraries account for over 80% of total revenue. Uncertainty around public libraries' funding levels and their ability to continue spending on digital content could weigh on operating performance.
“This is partially mitigated by one to five-year contracts with the public libraries allowing some earnings visibility. In addition, leverage has remained elevated at above 6x due to debt-funded acquisitions and investments in the workforce, data governance and data analytics,” Moody’s said in a statement.
The agency said it estimates OverDrive’s leverage should decline to 5.6x in 2024 from 6x in 2023 and 6.2x for the last 12 months ended June 30.
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