Moody’s rates Modena, loans B2

Moody's Ratings said it assigned a B2 rating to Modena Buyer LLC's, a debt issuing subsidiary of End User Computing, planned $2.6 billion senior secured first-lien term loan and $260 million senior secured first-lien revolving credit facility. The agency also gave a B2 corporate family rating and B2-PD probability of default rating to Modena Intermediate LLC (dba End User Computing). The outlook assigned for both issuers is stable.

The term loan will be used with new cash equity to support KKR & Co. Inc.'s acquisition of End User Computing and add more than $250 million cash to the balance sheet. Moody's expects EUC's debt to EBITDA leverage to be around 6x (Moody's adjusted, excluding pro forma cost savings) at the transaction’s close.

“The B2 CFR reflects EUC's high leverage at closing and the execution risks associated with the carve-out nature of the transaction. EUC competes with larger companies operating in the virtual desktop infrastructure and unified endpoint management markets including Citrix and Microsoft. EUC has a limited track record of operating as an independent entity which creates some executional uncertainty going forward. However, these risks are partially mitigated by UEM's leading market position and sustained product development initiatives which have resulted in increasing market share,” Moody’s said in a press release.

The outlook reflects an expectation of low to mid-single-digit percentage revenue growth and improving EBITDA margins over the next 12-18 months. Moody's said it forecasts leverage will decline to about 5x over the outlook period.

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