Moody's assigns Constant Contact B3

Moody's Investors Service assigned Constant Contact, Inc. a B3 corporate family rating and B3-PD probability of default rating connected with the company's spin-out from Endurance International Group Holdings, Inc. (Newfold Digital").

Concurrently, Moody's assigned a B2 rating to the company's proposed first-lien senior secured credit facility, consisting of a $125 million revolving credit facility, a $670 million term loan, and a $180 million delayed draw term loan, as well as a Caa2 rating to the company's $300 million senior secured second-lien term loan. The outlook is stable.

"While Constant Contact provides a strong value proposition to small and medium-sized businesses by offering an easy-to-use integrated suite of online marketing solutions at various price points and maintains strong profitability metrics, we view the company's business risk as high. Its modest scale, significant customer churn rate, the-term nature of its subscriptions and high customer acquisition cost are key constraints on the rating, " said Oleg Markin, a Moody's assistant vice president in a press release.

The proceeds, along with a contribution of common equity from Clearlake Capital Group, LP and Siris Capital Group, LLC will be used to finance the carve-out of Constant Contact. Both sponsors will retain equal ownership and voting interest in Constant Contact The delayed draw term loan will be available for the next 12 months from closing and will primarily be used to fund acquisitions.

The outlook is stable, reflecting Moody's view Constant Contact, will increase its revenue in the low-single-digit range driven by a forecast for increased email marketing in the U.S., the agency said.

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