Moody’s downgrades Shutterfly

Moody's Investors Service said it lowered Shutterfly, LLC's probability of default rating to D-PD from Caa3-PD after it completed a distressed debt exchange. Moody’s plans to upgrade the PDR to Caa2 in about three business days. The corporate family rating was affirmed at Caa2.

In connection with this rating action, the agency assigned B2 ratings to the new senior secured first-lien debts and Caa2 ratings to the new senior secured second-lien debts issued by Shutterfly Finance, LLC, a new subsidiary of the company.

As part of the debt exchange, the new senior secured second-lien debts, excluding the new $277.5 million second-lien revolving credit facility due 2026, were converted from the original senior secured first-lien debts in the old capital structure at an exchange price of 87%-90%. Moody's also downgraded the senior secured first-lien term loan with $6 million outstanding and senior secured first-lien notes with $3 million outstanding to Caa3 from Caa1, from the old capital structure that were not converted and remain outstanding at Shutterfly, LLC.

Moody's withdrew the Caa1 rating on the $300 million senior secured first-lien revolving credit facility due 2024 and the Ca rating on the $300 million of 11% senior unsecured notes due 2027 since they are no longer outstanding following the exchange. Shutterfly's outlook was revised to stable from negative.

The exchange eliminated about $168 million in debt but the agency said it estimates interest costs will offset the reduction in about two years.

“Hence, Moody's continues to expect leverage will remain in the 9x area over the next two years given the company's profitability and liquidity challenges,” the agency said in a statement.

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