Moody’s downgrades KeyPoint, loans

Moody's Investors Service said it downgraded KeyPoint Government Solutions, Inc.’s corporate family rating to B3 from B2 and probability of default rating to Caa1-PD from B3-PD.

The company's senior secured credit facilities, consisting of a $10 million revolving credit facility and a $150 million term loan, which includes the recently announced $22 million add-on to the $128 million term loan, were also downgraded to B3 from B2.

The outlook is stable.

KeyPoint's ratings were downgraded to reflect a recent decline in revenue and an accompanying deterioration in operating profits, which Moody's views to be emblematic of the unpredictable nature of demand associated with the company's key customer (the U.S. government's Office of Personnel Management – OPM).

The B3 corporate family rating also considers a dramatic change in the competitive environment of the background security clearances sector, prompted by the disqualification of a major competitor, which Moody's believes will create short-term challenges to KeyPoint before longer-term gains are realized through an increased level of OPM-mandated caseload.

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