Moody’s changes Institutional Shareholder to negative

Moody's Investors Service said it revised Institutional Shareholder Services, Inc.'s (ISS) ratings outlook to negative from stable and affirmed all ratings, including its B3 corporate family rating, B3-PD probability of default rating, B2 rating on the $187 million first-lien credit facility and Caa2 rating on the second-lien term loan.

Moody’s said the outlook change reflects meaningful deterioration in ISS' credit metrics and liquidity followings its spin-off from MSCI in early 2014. Despite ISS' good year-over-year revenue growth in 2014, estimated at around 7%, earnings declined, mainly as a result of higher than expected operating expenses.

At Dec. 31, debt/EBITDA increased from its LBO levels by about one turn to 7.5 times, and cushion under its net leverage covenant was tight at around 10%. Higher than expected levels of capital spending and separation costs that ensued from the spinoff have contributed to weak cash flow generation and covenant tightness, the agency said.

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