Moody’s cuts Harland Clarke loan, notes, view to stable

Moody’s Investors Service said it downgraded Harland Clarke Holdings Corp.’s senior secured term loan and senior secured notes ratings to Caa1 from B3 based on the company’s announcement it entered a commitment letter, with lenders accounting for 85% of its 2021 senior unsecured notes ($658 million outstanding as of December) and MacAndrews and Forbes Inc. to exchange its 2021 senior unsecured notes into new senior secured and senior unsecured obligations due 2024 and 2025, respectively.

Harland Clarke may also use up to $100 million in equity committed by the equity sponsor to fully repay any 2021 senior unsecured notes that are not otherwise exchanged. The ratings downgrade reflects reduced credit support from lower levels of unsecured debt in the company’s debt capital structure.

` Moody’s affirmed the corporate family rating at Caa1 and the probability of default rating at Caa1-PD. The ratings on the 2021 senior unsecured notes are affirmed and will be withdrawn upon repayment. “We anticipate that the newly exchanged debt will not be rated,” Moody’s said in a press release. The ratings on 2020 maturing notes are withdrawn due to debt repayment. The outlook is revised to stable from negative.

“We view an entry into this commitment as a positive development for Harland Clarke’s capital structure because it addresses the springing maturity tied to the 2021 notes. However, refinancing risk remains elevated because the company’s ABL facility matures in February 2022, with a subsequent May 2022 maturity on its senior secured term loan if the 2022 senior secured notes remain outstanding,” Moody’s said.

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