Moody’s gives Micro Focus CFR, loans B1

Moody's Investors Service said it assigned a B1 corporate family rating and a B1-PD probability of default rating to Micro Focus International plc.

The agency also assigned provisional B1 instrument ratings to the planned $1.85 billion term loans, consisting of a $1.35 billion tranche B term loan and $500 million tranche C term loan (LGD3-49%) and the $150 million revolving credit facility (LGD3-49%) issued by MA FinanceCo., LLC.

The outlooks are stable.

Micro Focus announced its intention to merge with Attachmate Group, Inc. (rated B2/negative) in a transaction in which Attachmate will be reversed into Micro Focus. Moody's expect the combined entity to generate a turnover of around $1.3 billion with an expected EBITDA margin of in the high 30%’s.

Moody’s said the B1 corporate family rating is supported by (a) the merged company's broad product portfolio of infrastructure software with satisfactory market positions in most of its markets, many of which are fragmented; (b) a broad customer diversification by industry and geography (legacy Micro Focus has more than 11,000 customers and legacy Attachmate over 23,000 customers); (c) the companies' relatively stable business with high visibility and recurring revenue of 70% for the combined entity; as well as (d) high operating margins and solid free cash flow generation capability.

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