Moody's rates Carbonite loan B1

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to Carbonite, Inc. in connection with the pending acquisition of Webroot Inc.

Moody's also assigned a B1 (LGD 3) instrument rating to the senior secured first-lien credit facilities consisting of a $175 million revolver and $550 million term loan.

The outlook is positive.

The proceeds from the proposed debt issuance and $98 million of balance sheet cash will be used to fund the acquisition and pay related fees, the agency said.

The transaction is expected to close in the first half of 2019, Moody's noted.

The ratings reflect the company's high initial leverage, intense competition and an expectation that consumer segment revenue will gradually erode beyond the near term as the company continues to focus on the higher growth small- to medium-sized business segment, the agency explained.

Although the company completed five smaller acquisitions since 2014, management does not have experience integrating an acquisition that increases revenues by 75%, Moody's said.

The ratings are supported by Carbonite's favorable position within the SMB and consumer segments of the data backup and endpoint security markets, the agency said.

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