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Moody's gives Octave Music B2, loans B1
Moody's Investors Service said it assigned the Octave Music Group, Inc. (TouchTunes) a B2 corporate family rating, a B2-PD probability of default rating, and B1 ratings to the planned $40 million revolving credit facility and $385 million senior secured first-lien term loan.
TouchTunes' B2 CFR reflects the company's market leadership position with the largest network of geographically diversified digitally connected jukeboxes in North America; the barriers to entry that stem from its highly fragmented network of 2,500+ independent operators with high retention rates (>98%), patented technology and cumulative R&D spending, but constrained by its high pro forma leverage of 7x and exposure to discretionary spending by consumers among other factors.
The term loan proceeds, a new unrated $102.5 million eight-year second-lien term loan and new cash equity from private equity sponsor TA Associates will be used to purchase TouchTunes from the company's previous sponsor, Searchlight Capital Partners, LP, via a leveraged buyout.
The $205.1 million outstanding senior secured term loan B due 2025 and $25 million revolver due 2024 were fully repaid and extinguished at closing on April 1. TA TT Buyer, LLC, an indirect holding company of the Octave Music Group, Inc., will be the initial borrower of the new credit facilities. Shortly after transaction closing, TA TT Buyer, LLC will likely merge into The Octave Music Group, Inc., which will likely become the surviving entity and post-closing borrower. The new credit facilities will benefit from a downstream guarantee from TA TT Midco, LLC, an indirect parent holding company of the borrower.
The outlook is stable.
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