S&P rates Corel loans B

Standard & Poor's said it assigned B long-term corporate credit and senior secured debt ratings to Corel Corp. and a B bank loan rating with a recovery rating of 3 to the company's proposed $165 million first-lien senior secured bank facility, which will consist of a $75 million revolving credit facility due 2011 and a $90 million term loan due 2012. The outlook is positive.

Concurrently with the closing of the bank facility, Corel plans to complete an initial public offering and the acquisition of 100% of WinZip Computing Ltd. from Corel's parent company, Vector Capital. The acquisition will be financed with the issuance of Corel shares immediately before the IPO and the assumption of WinZip debt.

Proceeds from the new credit facility and Corel's IPO will be used to repay existing debt of about $140 million, including the assumed WinZip debt. Following the transactions, total lease-adjusted debt to EBITDA will be about 2x.

S&P said the ratings on Corel reflect its weak market position within the highly competitive packaged software industry, a limited track record of profitability and short life span for all products.

These factors are only partially offset by Corel's brand recognition as a viable alternative to globally dominant packaged software providers, a large and diverse installed base and largely recurring revenue stream, the agency said.

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