Moody's upgrades On Assignment, rates loans Ba2

Moody's Investors Service said it upgraded On Assignment, Inc.'s corporate family rating to Ba2 from Ba3 and probability of default rating to Ba3-PD from B1-PD, affirmed its speculative grade liquidity rating at SGL-2 and assigned Ba2 (LGD3, 33%) ratings to its proposed $500 million senior secured credit facility, which will include a $125 million first-lien revolver due 2018, a $100 million first-lien term loan A due 2018 and a $275 million first-lien term loan B due 2020. The outlook is stable.

The agency said the upgrade reflects significant deleveraging from both debt reduction and revenue growth, exceeding expectations. Since the Apex acquisition, On Assignment has reduced debt by roughly $100 million, and Moody's expects the debt-to-EBITDA ratio to remain below 3 times.

The Ba2 corporate family rating reflects On Assignment's market position as one of the larger players in the attractive IT staffing market, Moody's said. Because of its focus on professional staffing niches with high bill rates, On Assignment realizes higher profitability margins than its rated peers within the competitive staffing industry, Moody's said.

Like its competitors, On Assignment is vulnerable to shifts in macroeconomic trends such as rising unemployment or a pullback in spending on capital projects, Moody's said, and its ratings are also constrained by On Assignment's size and geographic concentration in the United States.

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