Moody's rates Blue Coat loans B1, notes Caa2

Moody's Investors Service said it assigned a B3 corporate family rating and a B3-PD probability of default rating to Project Barbour Holdings Corp., B1 (LGD3) ratings to its $100 million senior secured first-lien revolving credit facility due 2020 and $1.05 billion senior secured first-lien term loan due 2022 and a Caa2 (LGD5) rating to its $570 million senior notes due 2023. The outlook is stable.

Project Barbour’s legal name is expected to change to Blue Coat Holdings, Inc. once funds affiliated with Bain Capital acquire Blue Coat Systems, Inc. from Thoma Bravo LLC in an all-cash transaction valued at about $2.4 billion. The new credit facilities and notes will be used to fund the acquisition and to refinance Blue Coat Systems’ existing debt.

The agency said the B3 corporate family rating principally reflects Blue Coat's very high initial leverage of about 8 times(Moody's adjusted), narrow product portfolio and reliance on one-time product sales that comprise a high proportion of product revenues.

At the same time, the rating is supported by the company’s leading position in the niche Secure Web Gateway appliances market and its recurring services revenues that are expected to grow faster than the product revenues and now comprise about 52% of its total revenues, Moody’s said.

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