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S&P rates Misys loans BB, on positive watch
S&P said it placed the B long-term corporate credit rating on Misys Newco 2 Sarl on CreditWatch with positive implications.
The agency also said it assigned a B long-term corporate credit rating to its subsidiary, Turaz Global Sarl, as well as Magic Newco 5 Sarl, Magic Newco LLC and Magic Bidco Ltd. – all of which are viewed as core subsidiaries within the Misys group because they serve as the group's financing entities.
S&P also said it placed the ratings on CreditWatch with positive implications.
The agency also assigned a BB rating to Misys's proposed senior secured term loans.
The recovery rating on these facilities is 3, indicating 50% to 70% expected default recovery.
The CreditWatch placement reflects an expectation of a significant de-leveraging event at Misys, which should lead to a meaningful improvement in the company's adjusted credit metrics, S&P explained.
Specifically, the agency said it anticipates that the company’s adjusted debt-to-EBITDA will decline to less than 4x by 2018.
S&P also said it expects meaningful improvement in the company's interest coverage as it plans to refinance its existing term loans, which should result in a material reduction in the company's cost of debt.
This is mainly because the company's second-lien debt, which will be repaid, bears a very high margin of 12%, the agency said.
The ratings also reflect the company’s solid positioning in the financial services software-solutions market, including the fragmented treasury and risk-management software solutions, S&P said, and its focus on mission-critical software to financial institutions, resulting in very high retention rates of about 94%.
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