Moody's downgrades Pegasus, rates loans Ba3, note Caa1

Moody's Investors Service said it downgraded Pegasus Solutions, Inc.'s corporate family rating to B3 from B1, downgraded the probability-of-default rating to B3 from B2, assigned Ba3 (LGD2, 16%) ratings to the company's proposed senior secured credit faculties and assigned a Caa1 (LGD5, 73%) rating to its $120 million eight-year senior unsecured notes.

The outlook is stable.

The proposed senior secured credit facility consists of a $10 million revolver, a $60 million term facility and a $30 million delayed-draw term loan facility. The proceeds from the $120 million note offering and $60 million term loan facility will be used to repay the existing senior secured credit facility, pay a $60 million dividend to shareholders and pay related transaction expenses.

The agency said the downgrade of the corporate family rating reflects substantially weaker interest coverage and cash flow metrics pro forma for the refinancing and dividend, consistent revenue declines over the last two years and the expectation of continued volume and pricing pressure in key service lines.

The ratings are supported by long-term relationships with a large hotel and travel agent customer base in the United States and Europe, cost reduction initiatives implemented during 2006 and good underlying growth trends in the lodging industry, Moody's said.

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