(The following statement was released by the rating agency)
Oct 4 - Standard & Poor's Ratings Services said today that its issue-level and recovery ratings on Deltek Inc.'s new first- and second-lien credit facilities are unchanged by the proposed $25 million increase to the first-lien term loan facility and corresponding $25 million decrease in the second-lien term loan facility. However, the additional first-lien debt brings our estimated first-lien recovery to the very low end of our '2' (70%-90%) recovery rating boundary, and we would likely lower the first-lien debt ratings if the company incurred any further material amounts of first-lien debt. Deltek is shifting the debt amounts between the first- and second-lien credit facilities to reduce interest expense. (For the complete recovery analysis, see the recovery report on Deltek, published Sept. 24, 2012, on RatingsDirect).
The corporate credit rating and outlook are also unaffected by the change to the capital structure, as there is no new incremental debt. The ratings on Deltek reflect the company's "weak" business risk profile and "highly leveraged" financial risk profile. The business risk incorporates the company's meaningful position in the Project and Portfolio Management (PPM) software market and improved product, vertical, and geographic diversity, but also its limited scale and modest position in the overall enterprise resource planning (ERP) market, stiff competition from larger players, and potential for the company's core end markets to experience low growth over the near term. The financial risk profile is distinguished by its very high leverage and diminished cash flow generation following the leveraged buyout. (For the complete corporate credit rating rationale, see the research update on Deltek, published Sept. 24, 2012, on RatingsDirect.)
(Caryn Trokie, New York Ratings Unit)