Moody’s rates Masergy CFR B3; loans B2, Caa2

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to Masergy Holdings, Inc.

The agency also assigned a B2 (LGD3) rating to the company's proposed $382.5 million senior secured first-lien credit facility, which consists of a $332.5 million seven-year term loan and a $50 million five-year revolver.

Additionally, Moody's assigned a Caa2 (LGD 5) rating to the proposed $140 million second-lien term loan.

Proceeds from the secured credit facilities will be used to fund the acquisition of Masergy by Berkshire Partners.

Moody’s said the B3 corporate family rating reflects the company’s high leverage and small scale, which limits its ability to absorb unexpected disruptions to its business.

The agency believes Masergy faces strong competition within its growing managed services division and that the barriers to entry into the unified communications as a service (UCaaS) and managed security markets are low.

Large scale cloud providers or incumbent carriers could develop or enhance existing competing applications and disrupt the market with aggressive pricing due to their clear scale and cost advantages, Moody’s explained.

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