Moody's rates Serena loans B2

Moody's Investors Service said it assigned a B2 corporate family rating and a B3-PD probability of default rating to Spartacus Merger Corp., an entity formed by HGGC, LLC that will acquire and merge into Serena Software, Inc., and B2 (LGD3, 35%) ratings to Serena's proposed first-lien senior secured bank credit facilities, which consist of a $20 million revolving credit facility due 2019 and a $345 million term loan due 2020. The outlook is stable.

At transaction closing, the agency will withdraw the following Serena Software ratings: B2 corporate family rating, B2-PD probability of default rating, B1 (LGD3, 37%) senior secured credit facilities, Caa1 (LGD5, 89%) senior subordinated notes due 2016 and SGL-2 speculative grade liquidity rating.

Proceeds from the proposed bank debt, new equity from the sponsor and new and rolled equity from the founder will be used to fund the acquisition of Serena and repay existing debt.

The agency said the B2 corporate family rating primarily reflects the company's challenging revenue growth/stabilization prospects and high pro forma leverage in the context of persistent revenue declines. Pro forma debt/EBITDA (including Moody's standard adjustments) was about 4.3 times for the last 12 months ended Jan. 31.

The proposed transaction includes a material repayment of funded debt and based on the pro forma run-rate EBITDA (including restructuring cost savings) results in a deleveraging transaction relative to the company's pre-acquisition structure that alleviates any immediate downward rating pressure, Moody's said.

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