Moody's rates Open Text loan Ba3

Moody's Investors Service said it assigned a first-time B1 corporate family rating and SGL-1 speculative grade liquidity rating to Open Text Corp. and a Ba3 rating to the company's senior secured facilities, which includes a $75 million senior secured revolver due 2011 and $390 million senior secured term loan due 2013.

The ratings reflect both the overall probability of default of the company, to which Moody's assigns a probability-of-default rating of B2, and a loss-given-default rating of LGD-2 for the senior secured facilities.

The outlook is stable.

Open Text is acquiring one of its competitors, Hummingbird Ltd. for $499 million (including fees and expenses) to create the second-largest enterprise content management software provider with roughly $670 million in pro forma revenue, the agency said. Net proceeds from the $390 million senior secured term loan together with $109 million of cash on hand will be used to finance the purchase in a leveraged transaction.

Moody's said Open Text's ratings reflect its recession-resistant operating cash flow, enhanced scale and product offering post-acquisition and cross-platform solutions, which help mitigate its high pro forma financial leverage against the backdrop of a rapidly consolidating industry.

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