Moody's rates Cornerstone loans B2, Caa2

Moody's Investors Service said it assigned new ratings to Cornerstone OnDemand, Inc. (Clearlake), including a B3 corporate family rating, a B3-PD probability of default rating, a B2 debt instrument rating to the proposed first-lien credit facility consisting of a $2.1175 billion first-lien term loan due 2028 and $300 million first-lien revolving credit facility due 2026 (expected to be undrawn at close), and a Caa2 debt instrument rating to the proposed $770 million second-lien term loan due 2029.

The outlook is stable.

The capital raised from the debt issuance will be used in conjunction with proceeds from issuing $700 million of preferred equity and approximately $1.94 billion of new cash equity to support Clearlake Capital Group, LP's $5.2 billion leveraged buyout of Cornerstone. In addition, about $240 million of cash will be added to the balance sheet.

Following the consummation of the acquisition, initial borrower Sunshine Software Merger Sub, Inc. will merge with and into Cornerstone OnDemand, with Cornerstone continuing operations as the surviving entity.

“Moody's views the transaction as credit negative, citing the reduced financial flexibility from the material increase in debt as the chief concern,” the agency said in a news release.

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