Proceeds of the proposed note issue will be used to refinance the existing $200 million 7.375% senior unsecured notes due June 1, 2015. Ratings for the existing 2015 notes will be withdrawn upon completion of the transaction. The new note issue is expected to result in modest interest expense savings and extend a portion of its debt maturity profile. The new notes are expected to be guaranteed by all of Deluxe's material subsidiaries, the same guarantee present in the existing 2015 notes and accordingly the new notes are rated at the same level.
See below for a list of the company's ratings:
..Issuer: Deluxe Corporation
Corporate Family Rating, Unchanged at Ba2
Probability of Default Rating, Unchanged at Ba2
New $200 million Sr. Notes due 2020, assigned a Ba2 (LGD3, 42%)
$84.8 million 5% Sr. Unsecured Notes due 12/15/2012, Unchanged at B1 (LGD5, 87%)
$253.5 million 5.125% Sr. Unsecured Notes due 10/1/2014, Unchanged at B1 (LGD5, 87%)
$200 million 7.375% Sr. Notes due 6/1/2015, Ba2 (LGD3, 42%) expected to be withdrawn upon closing.
$200 million 7% Sr. Notes due 3/15/2019, Unchanged at Ba2 (LGD3, 42%)
Outlook, remains stable
Deluxe's Ba2 Corporate Family Rating reflects ongoing pressure on the company's checks business (which accounts for 61% of its revenue as of the end of 2011), the commodity nature of its forms business (which makes up 14% of revenue in 2011), and the competitive environment in these industries. In addition, the company faces execution risks associated with the company's strategy to further diversify its business into the marketing and small business services space. While the company does generate meaningful positive free cash flow after dividends ($158 million LTM as of Q3 2012), Moody's expects Deluxe will look to reinvest a portion of those proceeds back into the business through acquisitions and initiatives to drive organic growth and diversify its business lines, resulting in modest reductions to leverage over the rating horizon. Over the long term, Moody's believes Deluxe will need to maintain a more conservative leverage profile than comparably-rated issuers due to the declining outlook for its consumer check business, which historically has declined in the 7% - 8% range annually, although the rate of order decline has been below this level in recent quarters. There is the potential for the level of decline to increase going forward given the secular declines in check printing and the ongoing evolution of payment alternatives.
The company's ratings are supported by its strong market position and extensive printing capabilities, good EBITDA margins, and successful integration of recent acquisitions. In 2011, the company reduced expenses by approximately $60 million bringing its adjusted EBITDA margin to just over 25%, as compared to less than 20% in 2008. Since 2006 the company reduced expenses by $385 million and Moody's expects $50 million of additional cost reductions in 2012. Leverage has decreased from 2.8x in 2009 to 2.1x (including Moody's standard adjustments) at Q3 2012. We expect leverage to decline to 1.9x as the $85 million notes that mature in December 2012 are repaid with its existing cash balance. In 2012, the company acquired internet marketing service provider OrangeSoda, Inc. for $27 million in addition to $6 million of other acquisitions. In 2011, the company acquired Banker's Dashboard for $39.7 million and PsPrint in the amount of $45.5 million which have been integrated into its Financial Services and Small Business Services divisions, respectively. For 2013, we expect revenue and EBITDA to grow in the low single digits including acquisitions. The company also benefits from our expectation that it will be able to maintain its market share in the check printing business.
We anticipate Deluxe will maintain a good Liquidity profile with an SGL-2 rating as we expect the company to continue to generate meaningful free cash flow from its mix of mature and developing businesses. The company has a cash balance of $106 million as of Q3 2012 which should be more than enough to fund the maturity of its $85 million note in December 2012. The company's $200 million revolving credit facility which matures in February 2017, is currently undrawn (with $8.5 million of LC's issued), providing incremental liquidity to cover tuck-in acquisitions, seasonal swings in working capital or opportunistic repurchases of its debt. Moody's expects free cash flow of approximately $150 million per year over the rating horizon, which is in excess of 20% of its total debt at year end 2012, more than sufficient to fund interest expense and small to moderate sized acquisitions or investments. The company is expected to continue to make dividend payments of over $50 million a year in addition to modest stock repurchases. Interest coverage is anticipated to increase from 7.9x pro-forma for the proposed refinancing to over 9x by the end of 2013. Covenants under the revolving credit facility include a 3.25x maximum net Total Debt-to-EBITDA ratio (as defined, temporarily increasing to 3.5x for certain acquisitions), minimum 3.25x EBIT-to-interest expense, and a $50 million minimum liquidity requirement six months prior to the maturity dates of the 2014 and 2015 notes. We expect the company to maintain a comfortable cushion of compliance with its Net Debt to EBITDA and Interest coverage covenants.
The stable outlook reflects Moody's view that Deluxe will continue to maintain a good liquidity profile, with debt-to-EBITDA leverage declining below 2x following the repayment of its $85 million note at the end of 2012. Its conservative capital structure, continued cost reductions and growth of Small Business Services, aided by small tuck in acquisitions, should allow Deluxe to manage the continued decline in check volumes.
Success diversifying the business away from its core check printing business, consistent revenue growth, stable to higher EBITDA margins, and debt reduction leading to sustained debt-to-EBITDA ratios below 1.75x with free cash flow-to-debt in excess of 15%, could position the company for an upgrade.
The ratings could experience downward pressure if declines in check order volumes accelerate meaningfully above current rates, debt-to-EBITDA ratios exceed 3.0x from earnings declines or a leveraging transaction, or if free cash flow-to-debt declines below 10%.
The principal methodology used in rating Deluxe Corporation was the Global Publishing Industry Methodology published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Deluxe Corporation ("Deluxe"), headquartered in St. Paul, MN, uses direct marketing, distributors and a North American sales force to provide a wide range of customized products and services to its customers. The company has been diversifying from its legacy printed-check business into a growing suite of business services, including logo design, payroll, web design and hosting, business networking and other web-based services to help small businesses. In the financial services industry, Deluxe sells check programs and fraud prevention, customer loyalty and retention programs to banks. Deluxe also sells personalized checks, accessories and other services directly to consumers. Revenue for LTM period ending Q3 2012 totaled $1.5 billion.
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Scott Van den Bosch Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653John Diaz MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.
Heute im Fokus
K+S drosselt Produktion. Niederlande gehen im Starbucks-Steuerstreit in Berufung. VW-Mitarbeiter müssen wohl auf üppige Bonuszahlung verzichten. Aktien der "Grande Nation" sind im Kommen. Black Friday: US-Handel startet ins Weihnachtsgeschäft. GfK-Konsumklima-Index leicht eingetrübt. Milliardendeal: Deutsche Wohnen will Wohneinheiten von Patrizia kaufen.
Diese Aktien sind auf den Kauflisten der Experten
Das wird dieses Jahr verschenkt
Diese Aktien sind auf den Verkauflisten der Experten