Moody's upgrades Clayton to Ba3

Moody's Investors Service said it upgraded Clayton Holdings, Inc.'s senior secured term loan, senior secured revolver and corporate family rating to Ba3 from B1 with a stable outlook.

The agency said the upgrade reflects Clayton's strong EBITDA margins, which were 17% in 2006; growth, reflecting a developing franchise; low debt levels and ample free cash flow.

Moody's said positive attributes are offset by earnings concentration in its due diligence business, which though improving remains high at 54% of total revenues. In addition, Clayton operates in a fragmented market, and its principal customers are large financial institutions with significant pricing power.

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