Library Technology Guides

Document Repository

Moody's lowers ProQuest CFR to B2, assigns B3 rating to unsecured bonds

Press Release: Moody’s Corporation [September 10, 2011]

Copyright (c) 2011 Moody’s Corporation

Abstract: Moody's Investors Service lowered the corporate family and probability of default ratings of ProQuest LLC (ProQuest) to B2 from B1 and assigned a B3 rating to the company's proposed $250 million senior unsecured bonds. The proposed transaction would increase total debt by approximately $100 million and annual interest expense by $15 million, and the downgrade of the corporate family rating incorporates the resultant negative impact on credit metrics. Also, the transaction creates greater flexibility for acquisitions and distributions.


New York, September 10, 2010 -- Moody's Investors Service lowered the corporate family and probability of default ratings of ProQuest LLC (ProQuest) to B2 from B1 and assigned a B3 rating to the company's proposed $250 million senior unsecured bonds. The proposed transaction would increase total debt by approximately $100 million and annual interest expense by $15 million, and the downgrade of the corporate family rating incorporates the resultant negative impact on credit metrics. Also, the transaction creates greater flexibility for acquisitions and distributions.

ProQuest intends to use proceeds of the transaction to 1) fund an up to $50 million distribution to its parent Cambridge Scientific Abstracts, Limited Partnership (CSA) 2) repay its $60 million second lien term loan in entirety 3) repay approximately $93 million of its first lien term loan and 4) fund transaction related fees and expenses. The remainder of the proceeds (approximately $35 million) will be available for general corporate purposes, including potential acquisitions.

Pro forma for the proposed offering, Moody's considers the first lien lenders to be in a stronger position based on repayment of a portion of the first lien bank debt and an increase in junior capital from the $250 million of senior unsecured bonds. In accordance with Moody's Loss Given Default Methodology, Moody's upgraded the senior secured first lien bank debt to Ba2 from Ba3.

RATINGS RATIONALE

Moody's believes ProQuest maintains a good market position and generates recurring revenue from subscriptions to extensive content databases sold primarily to libraries (with a concentration in academic libraries), and the B2 corporate family rating incorporates these benefits, tempered by our view that preserving this position will require continued investment in both content and technology. The company's high leverage and modest free cash flow limit its flexibility to manage these investment needs, although balance sheet cash of approximately $40 million pro forma for the proposed transaction provides good liquidity that could fund potential acquisitions or investment projects. Nevertheless, acquisitions would likely involve some integration costs, delaying the potential for incremental free cash flow from such acquisitions. Furthermore, some event risk exists related to ProQuest's position as the largest operating entity of its owner Cambridge Information Group (CIG) and limited visibility into the other operations of CIG, which might draw on ProQuest's financial support. CIG managed ProQuest more conservatively throughout 2009 than in prior years given economic challenges and the investment in a database platform consolidation project, but the proposed $50 million dividend demonstrates the willingness to weaken the credit profile for shareholder returns as well as growth.

ProQuest LLC

....Probability of Default Rating, Downgraded to B2 from B1

....Corporate Family Rating, Downgraded to B2 from B1

....Senior Unsecured Bonds, Assigned B3, LGD5, 72%

....Senior Secured First Lien Bank Credit Facility, Upgraded to Ba2, LGD2, 16%, from Ba3, LGD3, 39%

The stable outlook assumes ProQuest maintains an adequate liquidity profile and that leverage trends toward 5 times debt-to-EBITDA (as per Moody's adjustments) as investments in a platform consolidation decline over the next several years and the company begins to benefit from the expiration of an expensive information technology services contract. At the B2 corporate family rating, the stable outlook builds in tolerance for acquisitions that would cause leverage to temporarily rise towards 6 times debt-to-EBITDA and for temporary negative free cash flow related to integration costs, provided ProQuest maintained adequate liquidity to manage some cash consumption.

Upward momentum is somewhat limited by Moody's expectations for management to pursue a growth oriented financial strategy. An upgrade would likely require some evidence of a change in financial philosophy or permanent debt reduction.

Moody's would consider a negative outlook or downgrade based on expectations for sustained leverage exceeding 6 times debt-to-EBITDA or sustained negative free cash flow, whether due to incremental distributions, acquisitions, the loss of a critical content supplier, a material change in content licensing terms, or inability to achieve projected cost savings. A deterioration of the liquidity profile could also have negative ratings implications.

The principal methodology used in rating ProQuest LLC was Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA rating methodology published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Headquartered in Ann Arbor, Michigan, ProQuest LLC (ProQuest) aggregates, creates, and distributes academic and news content serving over 12,000 academic, corporate and public libraries worldwide. Cambridge Information Group (CIG) acquired the ProQuest Information and Learning (PQIL) business of Voyager Learning Company (fka ProQuest Company) for $222 million in February 2007 and merged it with its Cambridge Scientific Abstracts, Limited Partnership (CSA) business to form ProQuest. In conjunction with the transaction, ABRY Partners invested $63 million for a 20% stake in ProQuest with CIG contributing CSA for the remaining 80% voting interest and a cash distribution. Pro forma annual revenue for calendar year 2009 was approximately $450 million.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York

Karen Berckmann

Asst Vice President - Analyst

Corporate Finance Group

Moody's Investors Service

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

New York

Christina Padgett

Senior Vice President

Corporate Finance Group

Moody's Investors Service

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Moody's Investors Service

250 Greenwich Street

New York, NY 10007

USA

© 2015 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES ("MIS") ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody's Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

For Japan only: MOODY'S Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of MOODY'S Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

Permalink:
View Citation
Publication Year:2011
Type of Material:Press Release
Language English
Issue:September 10, 2011
Publisher:Moody’s Corporation
Company: ProQuest
Moody’s Corporation
Record Number:20586
Last Update:2015-05-06 06:10:31
Date Created:2015-05-06 06:10:30