Moody's rates VSTG loans B2, Caa2

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to VSTG Intermediate Holdings II, Inc.

The agency also said it assigned B2 ratings to the proposed $25 million senior secured first-lien revolver and $260 million senior secured first-lien term loan, along with a Caa2 rating to the proposed $100 million senior secured second-lien term loan.

The outlook is stable.

VSTG Intermediate Holdings is a new legal entity that was established as part of the transaction whereby affiliates of Providence Equity Partners are purchasing the company.

Following consummation of the buyout, VSTG Intermediate Holdings will merge with Vistage International, Inc. and that latter will be the surviving entity, the agency said.

Pro forma for the proposed transaction, Vistage's adjusted debt-to-EBITDA ratio is high at 7.4 times, but is supported by expectations of solid double-digit EBITA margins and good free cash flows.

Moody's expects that leverage will gradually improve to 7 times over the next 12 months, driven by a combination of earnings growth from new member wins, price increases and annual mandatory debt amortization of $2.6 million.

Vistage's steady membership growth and positive cash flows somewhat mitigate the sizable increase in debt with leverage likely remaining elevated at or higher than 7 times through 2018, the agency said.

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