Moody's: Securus loans B2, Caa2

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to Connect Merger Sub, Inc., the financing entity established to acquire Securus Holdings, Inc. The outlook is stable.

The agency also assigned B2 (LGD3, 35%) ratings to the company's proposed $50 million senior secured revolver due 2018 and $335 million senior secured first-lien term loan due 2020 and a Caa2 (LGD5, 87%) rating to the proposed $155 million senior secured second-lien term loan due 2021.

The proceeds will be used to finance the private transaction. Once the transaction is complete, Securus Technologies Holdings, Inc. will assume all obligations of Connect Merger Sub.

The agency said Securus' B3 corporate family rating reflects its small scale, high leverage and narrow business focus relative to other rated telecommunications companies.

The ratings are supported by the company's sophisticated, proprietary technology platform; its multi-year contracts with more than 2,200 correctional facilities in the United States and Canada; and improvements in operating margin and cash flow that have been achieved through cost containment and lower bad debt expense, Moody's said.

Moody's estimates Securus' leverage will be 6.6 times (Moody's adjusted) following the transaction and that the company's leverage will remain above 5 times through 2015.

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