Moody's rates Ultimate loans B2

Moody's Investors Service said it assigned to a B3 corporate family rating to Ultimate Software Group, Inc., along with a B3-PD probability of default rating and B2 (LGD 3) ratings to the company's proposed first-lien credit facilities comprising a $275 million revolving credit facility and $2.3 billion of term loans.

The outlook is positive.

The proceeds will be used to finance the acquisition of Ultimate by an investor group led by Hellman & Friedman for about $11 billion, Moody's said.

The ratings reflect Ultimate's very high financial risk profile, including very high initial financial leverage of about 9x, modestly positive free cash flow over the next 12- to 18-months and adequate liquidity, the agency said.

Ultimate has a solid track record of organic growth, Moody's said.

But, Ultimate's high debt burden will limit its financial flexibility, especially relative to its key competitors and amid large growth opportunities in an evolving market, the agency said.

Moody's said it expects Ultimate's total debt-to-EBITDA to decline to less than 7x and free cash flow to increase to the low single digit percentages of adjusted debt in 2020.

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