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Black Knight, Inc. -- Moody's says Black Knight gaining full ownership of Optimal Blue is a positive credit development despite debt increase

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Announcement: Moody's says Black Knight gaining full ownership of Optimal Blue is a positive credit development despite debt increaseGlobal Credit Research - 17 Feb 2022No change to Ba2 CFR and other ratingsNew York, February 17, 2022 -- Moody's Investors Service ("Moody's") said Black Knight, Inc.'s ("Black Knight") purchase of minority interests in its Optimal Blue ("OB") segment with $722.5 million worth of its shares in The Dun & Bradstreet Corporation (B2 stable, "D&B") and $433.5 million of loans drawn under its revolver is a positive credit development despite adding financial leverage and thereby pinching liquidity. The transaction reduces Black Knight's overall financial complexity by eliminating the minority interest and removes an external claim on the value and cash flows from OB. In addition, Moody's had already anticipated that the company might incur debt to fund a purchase of the OB minority partnership stakes held by outside investors. Since these long-term benefits outweigh the financial leverage increase, Moody's considers the news a positive credit development. However, the ratings, including the Ba2 corporate family rating ("CFR"), Ba1 senior secured and Ba3 senior unsecured debt instrument ratings, as well as the stable outlook, remain unchanged at this time.Moody's anticipates that Black Knight's debt to EBITDA of about 4.2 times as of December 31, 2021 and pro forma for the new revolver loans will return to below 4.0 times over the next 12 to 18 months through both EBITDA expansion and debt reduction. Free cash flow is expected to be around $350 million in 2022. Additional D&B share sales could also help fund debt repayments; Black Knight's remaining D&B shares are worth about $350 million. Black Knight's very good liquidity profile, reflected in the SGL-1 speculative grade liquidity rating, also benefits from over $400 million still available under the $1 billion senior secured revolving credit facility expiring March 2026.All financial metrics cited reflect Moody's standard adjustments.Black Knight also announced Tuesday that Anthony Jabbour, its shared chief executive officer with D&B, would step back to become Executive Chairman of the Board and Joe Nackashi has been appointed as CEO of Black Knight solely. Moody's had considered Mr. Jabbour's dual role unusual. Likewise, Moody's had considered Black Knight's large position in the equity of highly-leveraged D&B unusual for a public business services company. Moody's notes that the OB minority partnership investors, Cannae Holdings Inc. and Thomas H. Lee Partners, L.P., are also existing investors in D&B. The stock sale and elimination of a joint CEO role may signal greater independence for Black Knight from D&B and its investor group.Black Knight provides mission critical integrated software, data and analytics to the mortgage and real estate industries. Moody's expects 2022 revenue of about $1.6 billion.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. Edmond DeForest Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Karen Nickerson Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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 OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. 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