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S&P rates Universal Computer loans B+, CCC+
Standard & Poor's said it lowered the corporate credit rating on the Reynolds & Reynolds Co. to B from BB.
The outlook is stable.
The agency said it subsequently withdrew the rating on Reynolds & Reynolds and assigned a B corporate credit rating to parent company Universal Computer Systems Holding Inc.
The outlook is stable.
S&P also said it assigned a B+ rating with a recovery rating of 2 to the company's new $25 million senior secured revolving credit facility, $550 million first-lien term loan A and $1.75 billion first-lien term loan B. The recovery rating of 2 indicates 70% to 90% expected default recovery.
The agency also assigned a CCC+ rating with a recovery rating of 6 to the company's $1.1 billion second-lien term loan. The recovery rating of 6 indicates 0% to 10% expected default recovery.
The company is using the loan proceeds, together with $900 million of unrated holding company pay-in-kind notes and equity contribution, to fund the proposed transaction, including refinancing existing debt.
The downgrade is based on the substantial increase in pro forma leverage following the transaction and an expectation that the company's leverage will remain high over the intermediate term, S&P said.
The ratings reflect the company's fair business risk profile and highly leveraged financial risk profile, incorporating a relatively narrow and cyclical end market, coupled with high pro forma leverage, the agency said.
Consistent profitability, positive free cash flow generation following the transaction and a solid market position in the North American automobile dealer management solutions market are partial offsets, S&P said.
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