Moody's rates Unit4, loans B3

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to Bock Capital Bidco BV (Unit4) after the company announced its planned acquisition of enterprise software provider Unit4.

Concurrently, Moody's gave B3 ratings to the planned €100 million 6.5 year senior secured revolving credit facility and €675 million seven-year senior secured term loan raised by Bock Capital Bidco.

Unit4's ratings for its capital structure at AI Avocado BV are unchanged and will be fully withdrawn upon the deal’s closing and full repayment of its debt facilities. Bock Capital Bidco is the top entity of the restricted group under the new credit facility agreement and will produce audited consolidated accounts in the future. Moody's said it withdrew the B3 CFR, B3-PD PDR, and stable outlook of AI Avocado Holding BV.

"Unit4 is well positioned in the B3 rating category, reflecting its solid positioning in the ERP market and our expectations of growth in demand for the company's cloud-based software solutions," said Fabrizio Marchesi, a Moody’s vice president, senior analyst and lead analyst for the company, in a press release.

"That said, the rating also reflects execution risks associated with the ability of the company to deliver EBITDA growth and improvements in free cash flow generation, as well as Unit4's high opening leverage and aggressive financial policy including the possibility that the company would look to refinance the PIYW loan issued by its parent in the future by raising additional debt within the credit facility restricted group, which would delay deleveraging," added Marchesi.

The loan proceeds will be used alongside equity and a €225 million pay-if-you-want loan due 2029, which was structured outside the Bock Capital Bidco’s restricted group and placed with third-party lenders, to fund the proposed acquisition of Unit4 and refinance Unit4's debt, among other uses.

The outlook is stable. The outlook reflects the view that Unit4 will deliver organic revenue growth and improve its Moody's-adjusted EBITDA margin towards the high 20s in percentage terms, with Moody's-adjusted gross debt/EBITDA declining towards 6.5x over the next 12-18 months, the agency said.

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