Moody's downgrades Internet Brands, rates loans B1, Caa1

Moody's Investors Service said it downgraded Internet Brands, Inc.’s corporate family rating to B2 from B1 and affirmed its probability of default rating at B2-PD. It also assigned B1 (LGD3, 35%) ratings to Micro Holding Corp. and MH Sub I, LLC’s $75 million revolving credit facility due 2019, $435 million first-lien term loan due 2021 and $50 million delayed-draw first-lien term loan due 2021 and a Caa1 (LGD5, 87%) rating to their $195 million second-lien term loan due 2022. The outlook is stable.

Proceeds from the new credit facilities plus $554 million of equity will be used to finance the leveraged buyout of Internet Brands by private equity firm Kohlberg Kravis Roberts & Co. LP from Hellman & Friedman for a total purchase price of about $1.13 billion.

The agency said the downgrade of the corporate family rating reflects Internet Brands' elevated leverage following its second leveraged buyout in less than four years. Pro forma for the contemplated KKR buyout, the ratio of total debt to EBITDA will climb to 8.1 times from 4.0 times as of March before declining to around 7 times by the end of 2014, Moody’s predicted.

Leverage is high compared to the median of 5.3 times for B2-rated global industry peers, but Moody’s believes the business model can accommodate a more leveraged capital structure due to Internet Brands' revenue visibility, focus on performance-based ad revenue, high EBITDA margins in the 40% to 45% range and history of positive free cash flow generation.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.