Moody's assigns Ba1 to Open Text loan

Moody's Investors Service said it assigned a Ba1 rating to Open Text Corp.'s planned senior secured term loan being issued in conjunction with the company's pending acquisition of Micro Focus International plc.

Open Text's credit ratings, including its Ba1 corporate family rating and the Baa2 and Ba2 ratings for its senior secured credit facilities and senior unsecured notes, respectively, remain on review for downgrade. Open Text's SGL-1 speculative grade liquidity rating is unaffected by the rating action, the agency said.

Open Text plans to finance the acquisition of Micro Focus with $4.6 billion in new debt, borrowings under its revolving credit facility, and $1.3 billion of cash on hand.

The $4.6 billion of new debt includes funds from the planned term loan facility and access to funds under a $2 billion of bridge loan commitment. The company intends to reduce commitments or borrowings under the bridge loan by accessing debt capital markets, subject to market conditions.

“The Ba1 rating for Open Text's proposed term loans incorporates Moody's assumption that the company's entire $4.6 billion of new debt will consist of first-lien secured debt, thereby substantially increasing the proportion of first-lien debt in the final capital structure,” the agency said in a press release.

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