Bangkok--27 Feb--Standard & Poor's
Private equity firm Texas Pacific Group intends to acquire Eze Software (which provides software and solutions to buy-side institutions and includes Eze Castle Software LLC, RealTick LLC, Eze Castle Software Inc., and related subsidiaries of ConvergEx Holdings LLC), funded through a combination of new equity and senior secured debt.Concurrently, Eze Software plans to acquire Tradar, which provides of portfolio management and accounting solutions to buy-side institutions.We are assigning a 'B' corporate rating to Eze Software and a stable outlook.We are also assigning issue and recovery ratings to the company's first-lien credit facilities and second-lien term loan. The stable outlook reflects our expectation that the company will maintain consistent profitability and modest free cash flow generation.
SAN FRANCISCO (Standard & Poor's) Feb. 26, 2013--Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Eze Software (a/k/a Eze Castle Software Inc.). The outlook is stable.
We also assigned a 'B+' issue-level rating with a recovery rating of '2' to the company's $75 million senior secured revolving credit facility and $335 million first-lien term loan. In addition, we assigned a 'CCC+' issue-level rating with a '6' recovery rating to the company's $170 million senior secured second-lien term loan. The '2' recovery rating indicates expectations for substantial (70% to 90%) recovery of principal in the event of default and the '6' recovery rating indicates expectations for negligible (0% to 10%) recovery. "The ratings on Eze Software reflect the company's 'weak' business profile, characterized by its relatively narrow target market and dependence on cyclical financial end markets, and its 'highly leveraged' financial profile," said Standard & Poor's credit analyst Christian Frank. The company's leading market position in the hedge fund software market, highly recurring license revenues, and modest positive free cash flow are partial offsets.
The stable outlook reflects Eze Software's stable free cash flow generation, resulting from the company's recurring and predictable revenue base. It also reflects our expectation that it will maintain its competitive position in key markets. We may lower the rating if profitability deteriorates or if the company pursues a material shareholder distribution, such that pro-forma adjusted leverage is sustained in the low 7x area.
Although unlikely in the next 12 months, we could raise the rating if the company continues its revenue and EBITDA growth, or it uses its free cash flow to repay debt, such that adjusted leverage declines to 5x or below on a sustained basis.