Moody's downgrades GXS

Moody's Investors Service said it downgraded the debt of Global Exchange Services Inc., recognizing that debt protection measures are unlikely to improve given current business trends and GXS' levered capital structure.

Moody's cut GXS' senior implied rating to B2 from B1, $100 million senior secured credit facilities to B2 from B1, $105 million floating-rate notes due 2008 to B3 from B2, $235 million subordinated debt due 2009 to Caa1 from B3 and senior unsecured issuer rating to B3 from B2.

This action concludes the review started in September. Since then, Moody's said an affiliate of GXS' majority owner, Francisco Partners, announced it acquired two IBM business units which it intends to merge with GXS within the next six months.

Moody's said it believes that the new business units could improve GXS' operating leverage and cash flow, on the assumption that GXS can service the new revenue base with its existing operating assets.

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