Moody’s cuts APX, notes; rates notes Caa2

Moody's Investors Service said it downgraded APX Group, Inc.'s (Vivint, Inc.) corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and senior unsecured notes to Caa2 (LGD5) from Caa1 (LGD5).

The agency also affirmed the B1 (LGD2) instrument rating on the existing senior secured notes and the SGL-3 speculative grade liquidity rating.

At the same time, Moody’s assigned Caa2 (LGD5) instrument ratings on Vivint's new $400 million senior unsecured notes.

The outlook is stable.

Proceeds from the new unsecured debt issuance will be used to pay down $150 million of existing senior secured notes and their associated call premium, pay down any revolver borrowings, provide significant balance sheet cash for general corporate purposes, and pay for transaction fees and expenses.

“Vivint had been weakly positioned in the B2 ratings category for an extended period because of persistently high leverage levels relative to its alarm-monitoring competitors, and this latest financing adds more than two turns to Moody's-adjusted debt-to-RMR (recurring monthly revenue), bringing the leverage measure to about 42 times, more in keeping with Vivint's B3-rated peers,” Moody’s said in a news release.

The B3 corporate family rating also reflects the agency’s expectations that steady state free cash flow, already weak, will fall to about breakeven or lower as interest expenses rise moderately and as the company undertakes additional spending for new channel expansion through its recently announced agreement with the Best Buy retail chain, Moody’s explained.

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