Moody's cuts GXS notes to Caa2, rates loans B2, Caa1

Moody's Investors Service said it affirmed the B2 senior implied rating of GXS Corp. and downgraded the $235 million senior subordinated debt due 2012 to Caa2 from Caa1.

Moody's also assigned new ratings to a proposed financing package. More specifically, Moody's assigned a B2 rating to the new $50 million senior secured first-lien revolving credit facility maturing 2010 and $300 million senior secured first-lien term loan maturing 2011 and a Caa1 rating to the new $100 million senior secured second-lien term loan due 2011.

The outlook remains negative.

Proceeds of the new debt will be used to refinance existing debt as well as provide long-term financing to complete the purchase of IBM's EDI assets, purchased by Francisco Partners, also currently majority shareholder in heritage GXS, for $135 million.

Moody's said the ratings are supported by GXS' leadership position in EDI, which management estimates at greater than 40% of the market; the company's success in transitioning monthly contract into multi-year contracts; and new products. The downgrade of the senior subordinated rating to Caa2 reflects the changes in the company's capital structure which increases the proportion of secured debt and as a result further subordinates the subordinated note holders.

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