Moody's assigns Consilio B3

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to GI Consilio Parent LLC. Concurrently, Moody's assigned a B2 rating to the company's proposed $1.085 billion first-lien senior secured credit facility (including a $1.01 billion term loan and a $75 million revolver) and a Caa2 rating to the proposed $300 million second-lien senior secured term loan.

The proceeds from the proposed debt financing and new equity will be used to fund a leveraged buyout of Consilio by Stone Point Capital LLC and its affiliates from GI Partners. The proceeds will also be used to buy Xact Data Discovery, which Aquiline Capital Partners are concurrently acquiring. “Upon close of the transaction, Consilio will be combined with Xact, creating the largest pure-play (by revenue) global eDiscovery data provider. Aquiline will roll its equity into the combined company, which will operate under the Consilio brand. Consilio will be majority-owned by Stone Point, with Aquiline and management retaining a minority stake,” Moody’s said in a press release.

“At the same time, the transaction involves a very high level of debt and leverage and Moody's expects that Consilio will continue to find value in new opportunities to expand its customer base, diversify revenue and add additional technological capabilities, which may be funded with incremental debt,” the agency said.

Moody’s noted the B3 CFR reflects Consilio’s high pro forma debt-to-EBITDA leverage, estimated at 7.4 times (Moody's adjusted and excluding acquisition synergies) at Dec. 31, integration risk associated with the business combination, operations in an intensely competitive and fragmented eDiscovery market with some customer concentration and its acquisitive growth strategy.

The outlook is stable. The agency said it sees Consilio generating low-to-mid-single digit organic revenue growth, some expansion of the EBITDA margin from realization of synergies and operating leverage, steady deleveraging to below six times and maintenance of good liquidity.

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