S&P assigns B to Modena Buyer, loans

S&P said it assigned B ratings to Modena Buyer LLC and its planned about $2.9 billion of new credit facilities, consisting of a $260 million first-lien revolving credit facility and a $2.6 billion first-lien term loan. The revolver is expected to be undrawn at transaction close. The outlook is stable.

Affiliates of Kohlberg Kravis Roberts & Co. Inc. agreed with Broadcom Inc. to acquire the end user computing division (EUC) formerly of VMware LLC in an all-cash carve-out transaction for about $3.8 billion. Modena will be the holding company for the division.

“Recurring revenues, a well-diversified and entrenched customer base, and a good net retention rate should support EUC's stable performance as a stand-alone entity. EUC operates in two major product segments: virtualized desktop infrastructure (VDI–under the brand name, Horizon) and unified endpoint management (UEM–under the brand name, Workspace One). These core offerings are well established, mature, and typically deeply entrenched in customers information technology (IT) operations and infrastructure, which provides support for relatively stable operating performance through the potential disruption of a spinoff,” S&P said in a press release.

The outlook reflects the view that while EUC's leverage will be high in the first 12 months post transaction close due to transitory costs, the agency said it forecasts its leverage will be reduced to under 7x as those one-time expenses roll off.

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