Moody's assigns Lereta, loans B2

Moody's Investors Service said it assigned first time ratings to Lereta, LLC, including a B2 corporate family rating, a B2-PD probability of default rating and B2 ratings on a new $30 million first-lien revolving credit facility due 2026 and a new $250 million first-lien term loan due 2028.

“The B2 CFR reflects Lereta's small scale, narrow operating scope with exposure to the housing market and economic cycles and high Moody's adjusted opening pro forma debt to EBITDA of 6.1x (including capitalized software as an expense). Lereta's business is focused on the tax and flood determination portion of a mortgage application and the company serves a niche area of the overall mortgage process. Revenue is dependent on the volume of originations that include both purchase and refinancing originations. In a rising interest-rate environment, the volume of originations drops since refinancing activity falls,” the agency said in a press release.

Lereta is also exposed to economic cycles since during times of financial stress fewer people buy homes

Term loan proceeds, new common equity and rollover equity will be used by the private equity firms Flexpoint Ford and Vestar Capital Partners to acquire Lereta.

“Moody's expects the measure to increase to approximately 7.1x by the end of this year and decline to 6.3x by the end of 2022. The increase in leverage from opening leverage is due to higher capitalized software expenses this year as the company re-platforms its IT systems to cloud technology,” the agency said.

The outlook is stable.

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