Moody’s puts KLDiscovery on upgrade review

Moody's Investors Service said it placed the ratings of LD Intermediate Holdings, Inc., which does business as KLDiscovery, under review for upgrade.

The ratings on review include its Caa1 corporate family rating, Caa1-PD probability of default rating, B3 (LGD 3) senior secured first-lien credit facility rating and Caa3 (LGD 5) second-lien term loan.

The action follows news that KLDiscovery has entered into a definitive merger agreement with Pivotal Acquisition Corp., a publicly traded special purpose acquisition company, Moody’s said.

If the transaction closes as expected, KLDiscovery will become a wholly owned subsidiary of the publicly traded company and will use a portion of $230 million in escrowed funds raised from a January 2019 SPAC offering to repay about $136 million of debt, fund $75 million of cash to the balance sheet and pay deal related fees, the agency said.

The company plans to use the cash on the balance sheet to fund organic growth and a targeted mergers and acquisitions strategy, Moody’s said.

The review acknowledges that the proposed transaction should meaningfully improve the company’s leverage and liquidity, the agency said.

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