Moody's gives Technicolor loans B2, Ba2

Moody's Investors Service said it gave B2 ratings to Technicolor Creative Studios SA’s planned €623 million equivalent, split into €564.2 million and $60 million tranches, senior secured first-lien term loan maturing in 2026 and a Ba2 rating to the planned €40 million super senior secured first-lien revolving credit facility due 2025. Technicolor Creative Services USA, Inc. is co-borrower for the loans.

Additionally, the agency assigned B2 corporate family rating and a probability of default rating of B2-PD to the company. The outlook is stable.

"The B2 rating is currently weakly positioned in light of the company's high opening gross leverage post transaction closing and the expectation of negative free cash flow at least through 2023. The rating is constrained by TCS' exposure to economic cycles and relatively small scale and high customer concentration," said Elvira Nurgalieva, Moody’s lead analyst for TCS, in a press release.

“At the same time, the rating is supported by TCS' leading position in a fragmented creative content creation market, good long-term growth prospects across all its end markets and solid profitability,” added Nurgalieva.

As announced by Technicolor SA on June 14, TCS will be listed on Euronext Paris, subject to the annual general meeting's approval early next month. Upon completion of the transaction, expected in the third quarter, Technicolor will keep a 35% stake in TCS.

TCS is expected to use the term loan proceeds and possibly the revolver to pay cash consideration to Technicolor and to pay down debt.

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