Moody’s rates Syncsort loans B2, Caa2

Moody's Investors Service said it assigned a first-time B3 corporate family rating to Syncsort Inc., along with a B3-PD probability of default rating, B2 rating on its $315 million of first-lien credit facilities and Caa2 rating on its $80 million of second-lien credit facilities.

The outlook is stable.

The proceeds from the credit facilities will be used to refinance its existing debt and fund the proposed acquisition of the Trillium Software business of Harte Hanks, Inc. for $112 million, Moody’s explained.

The ratings reflect Syncsort's limited product diversity, modest operating scale and some revenue exposure to products with declining revenues, the agency said.

Execution risk for the company will be high over the next 12 months in integrating the two companies and improving sales-force productivity at Trillium software while executing on cost synergies to grow profitability, Moody’s said.

Given the high business risks, initial leverage is high at about 6.7x before about $7 million of annual cost synergies from the combination are included, which is expected by the end of the first quarter of 2017, the agency said.

The ratings are supported by Syncsort's track record of high renewal rates for revenues from software maintenance services and term licenses sales, Moody’s said.

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