Moody's assigns Clara.net, loans B2

Moody's Investors Service said it assigned a first-time B2 corporate family rating and a B2-PD probability of default rating to Clara.net Holdings Ltd. Concurrently, the agency gave a B2 rating to the proposed dual-tranche €300 million and £70 million backed senior secured term loan B and the €75 million backed senior secured revolving credit facility, due in 2028 and 2026 respectively, to be issued by Claranet Group Ltd. The outlook is stable.

"The B2 rating reflects Claranet's good positioning in the cloud solutions market, supported by geographical diversification across Europe and the Americas. The rating also benefits from the good organic growth prospects of the company largely driven by increasing cloud adoption across the mid-market and sub-enterprise segments," said Luigi Bucci, Moody's lead analyst for Claranet, in a press release.

“At the same time, the rating also reflects the high Moody's-adjusted leverage of around 6x expected by fiscal 2021, ending June 2021, and the debt-funded acquisition risk given the acquisitive nature of the business. The rating is also constrained by the limited Moody's-adjusted free cash flow (FCF) generation over the next 12-18 months. The current rating is weakly positioned in the B2 category, leaving no room for underperformance against current estimates,” Bucci added.

Term loan proceeds will be used to refinance bank debt, add cash on balance sheet and pay associated fees and expenses. Added cash will be used for general corporate purposes as well as bolt-on M&A.

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