Moody’s rates ClubCorp facilities B1, notes Caa1

Moody's Investors Service said it assigned Constellation Merger Sub Inc. (ClubCorp) new ratings in anticipation of its leveraged buyout of previously rated ClubCorp Club Operations, Inc. (formerly B1 corporate family rating), including a corporate family rating and probability of default rating of B2 and B2-PD, respectively.

At the same time, the agency assigned B1 ratings to each of the company's newly proposed senior secured credit facilities, which will consist of a $1.125 billion seven-year first-lien term loan B and a $175 million five-year first-lien revolver.

In addition, Moody's assigned a Caa1 rating to the company's newly proposed $475 million eight-year senior unsecured notes.

The outlook is stable.

Constellation Merger Sub will be renamed ClubCorp Holdings, Inc. following completion of the pending acquisition. All ratings for the pre-LBO entity will be withdrawn upon closing of this transaction as all previously rated debt is being refinanced.

Proceeds from the proposed $1.125 billion term loan and $475 million of unsecured notes together with about $635 million of new sponsor equity from Apollo Global Management, LLC and $32 million of ClubCorp balance sheet cash will be used to repay existing debt of roughly $1 billion, purchase the equity of ClubCorp for roughly $1.1 billion, and pay estimated transaction fees, OID, and debt redemption premium of $134 million. Also, about $103 million of existing (unrated) debt, primarily comprised of capital lease obligations and mortgage loans, will be rolled into the new capital structure.

"ClubCorp's leverage is high with opening pro forma debt-to-EBITDA of more than 6.5 times, but it is likely to moderate and approach the low 6.0 times range over the next 12-18 months and improve further thereafter," Brian Silver, Moody’s vice president and lead analyst for ClubCorp, said in a news release.

"Deleveraging will be driven by profitability growth, largely stemming from a number of planned cost-saving initiatives, in concert with voluntary debt repayment over time. We expect that the company will continue to grow its portfolio of clubs via acquisitions and engage in subsequent reinvention projects in an effort to grow its membership base, but growth-oriented capital expenditures will likely ease under new ownership, which taken together with earnings growth will bolster free cash flows over the next few years."

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