Moody's assigns SmartBear B3, facilities B2

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to AQA Acquisition Holdings, Inc. (SmartBear).

Concurrently, Moody's assigned a B2 rating to SmartBear's proposed senior secured first-lien bank credit facilities, which will consist of a $50 million revolving credit facility and a $385 million term loan.

Term loan proceeds, an unrated $130 million second-lien term loan, about $30 million of balance sheet cash and new cash equity from Vista Equity Partners will be used to refinance the company's debt and fund Vista's purchase of SmartBear equity.

“SmartBear's B3 CFR reflects the credit risks associated with SmartBear's small revenue base, narrow market focus and high leverage levels. Pro forma for the proposed transaction, Moody's adjusted leverage is in excess of 10x; however, when adjusting for certain one-time expenses and including change in deferred revenue, Moody's cash adjusted leverage was approximately 7.8x as of the LTM period ended Sept. 30, 2020,” the agency said in a press release.

The outlook is stable. The outlook reflects Moody's expectations SmartBear will continue to grow revenue and EBITDA organically in the high-single to low-double-digit percent range over the next 12-18 months, which will drive Moody's cash adjusted leverage below 7x, the agency said.

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