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Moody's cuts Kronos loans, rates new loans B1, Caa1
Moody's Investors Service said it affirmed Kronos Inc.'s B2 corporate family and probability of default ratings, along with the Caa1 rating on its second-lien term loan due June 2015.
The loan's LGD assessment was revised to LGD 5, 88% from LGD 5, 84%.
The agency also said it assigned B1 ratings to its senior secured revolver credit facility (extended tranche) due June 2016, first-lien term loan (extended tranche) due June 2017 and $370 million first-lien incremental term loan due December 2017.
The agency also assigned a Caa1 (LGD 5, 88%) rating to its second-lien term loan (extended tranche) due June 2018.
Moody's also lowered its senior secured revolver credit facility due June 2013 to B1 (LGD 3, 36%) from Ba3 (LGD 3, 30%) and first-lien term loan due June 2014 to B1 (LGD 3, 36%) from Ba3 (LGD 3, 30%).
The outlook is stable.
The proceeds will be combined with about $200 million of cash on hand to pay dividends to shareholders, Moody's said.
The proposed dividend recapitalization will increase Kronos' leverage to 5.5x from 4.4x and reduce the company's financial flexibility amid intensifying competition in the human capital management enterprise software market, Moody's said.
The ratings reflect an expectation that Kronos will generate strong and growing cash flow from operations driven by revenue growth and modest expansion in EBITDA margins, the agency said.
But, despite expectations for Kronos' strong cash flow generation and its resulting ability to pare debt, Moody's said it believes that the company's aggressive shareholder-oriented financial policies will cause leverage to remain elevated over the foreseeable future.
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