Moody's lowers Applied Systems first-lien loans

Moody's Investors Service said it affirmed Applied Systems, Inc.'s B3 corporate family rating and B3-PD probability of default rating following news that the company will raise $210 million of incremental first-lien and $60 million of incremental second-lien debt in a dividend recapitalization transaction.

Moody's also said it downgraded the ratings for the senior secured first-lien credit facilities to B2 (LGD 3) from B1 (LGD 3) and affirmed the senior secured second-lien rating at Caa2.

The outlook is stable.

The proceeds will be used to fund a $200 million distribution to shareholders and contribute some cash to the balance sheet, the agency said.

The ratings reflect the company's very aggressive financial policies, underpinned by the very high pro forma leverage level of about 9.4x based on the proposed debt-funded dividend, Moody's said.

The ratings also consider the company's relatively small scale with revenue of less than $400 million, the agency said, and its concentrated business profile as a niche provider of software and information services to the property and casualty (P&C) insurance industry.

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