Moody’s lowers Hyland, rates loans B2, Caa2

Moody’s Investors Service said it downgraded Hyland Software, Inc.’s corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

Moody’s also said it assigned instrument ratings of B2 (LGD 3) to its $40 million senior first-lien revolver due 2022 and $600 million senior first-lien term loan due 2020, along with a Caa2 (LGD 6) to the new $180 million second-lien term loan due Caa2.

The outlook remains stable.

The company’s board of directors agreed to recapitalize Hyland with a new TB fund, which will own the majority of the common equity interest in Hyland, Moody’s said.

The balance of the proceeds from the new term loans and an equity contribution of about $715 million will be used to recapitalize Hyland, the agency said.

The company’s ratings are primarily driven by the very high leverage estimated at 7.7x following the transaction, Moody’s said.

The ratings also consider the potential for periodic increases in debt to fund shareholder returns, followed by de-leveraging over time, the agency added.

The company faces high business risks resulting from its modest operating scale relative to some of its competitors and its limited product portfolio focused on a niche segment within the ECM software market, Moody’s said.

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