S&P assigns B, CCC+ to Exact loans

Standard & Poor's said it assigned its preliminary B long-term corporate credit rating to Netherlands-based software company Eiger Acquisition BV (Exact).

The outlook is stable.

At the same time, the agency assigned its preliminary B issue rating to Exact's proposed senior secured loans due 2022 and the revolving credit facility due 2020. The preliminary recovery rating is 3, indicating an expectation of meaningful (50%-70%) recovery in the event of a default.

S&P also assigned our preliminary CCC+ issue rating to the proposed senior unsecured loans due 2023. The preliminary recovery rating is 6, indicating an expectation of negligible (0-10%) recovery in the event of a default.

The preliminary long-term corporate credit rating reflects the agency’s assessment of Exact's business risk profile as "weak" and its financial risk profile as "highly leveraged."

In S&P’s view, Exact has a narrow product offering and is relatively small, and the industry shows only limited barriers to entry. Exact mainly provides accounting software and enterprise resource planning (ERP) solutions to small and midsize companies in the Netherlands, and to a lesser extent in Belgium.

The agency considers its overall competitive position to be weaker than that of larger international competitors – including Microsoft, SAP and Oracle – which however mainly target larger customers, and it is somewhat smaller than domestic players, including Unit 4.

Other weaknesses include limited geographic diversification, despite a presence in North America where it generates about 25% of its revenues.

S&P believes it could technically be rather simple for a customer to switch to an alternative software supplier, particularly for accounting solutions, despite the related costs.

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