Moody's gives Kofax B3, loans B2, Caa2

Moody's Investors Service said it gave Project Leopard Holdings, Inc. (Kofax) a B3 corporate family rating, a B3-PD probability of default rating, a B2 rating to the planned senior secured first-lien credit facilities, consisting of a $1.346 billion term loan and a $150 million revolver, and a Caa2 rating to the proposed $348 million senior secured second-lien term loan. The outlook is stable.

“Kofax's B3 CFR is constrained by the company's high pro forma leverage of 7.3x debt/EBITDA as of Dec. 31, 2021 (Moody's adjusted), projected limited free cash flow generation and expectation for aggressive financial policies, a key ESG consideration. In addition, Kofax operates in mature and highly competitive capture and print management markets that in Moody's view have limited organic growth potential,” the agency said in a press release.

The proceeds from the two term loans and cash equity from private equity firms TA Associates and Clearlake Capital will be used to buy Kofax from Thoma Bravo for $2.3 billion.

Upon the full repayment of debt at the close of the transaction, the CFR, PDR and debt instrument ratings for the company under Thoma Bravo ownership will be withdrawn, Moody’s said.

“The stable outlook reflects Moody's expectation that Kofax's subscription license and SaaS revenue will continue to show strong growth and will largely offset the decline in perpetual license sales as the company transitions to a recurring revenue model. Moody's also expects that Kofax's leverage will remain in the mid-7x range in the next 12 to 18 months with free cash flow to debt in the low single-digit percentage,” the agency said.

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