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Corelogic, Inc. (New) -- Moody's assigns CoreLogic go-private B2 CFR, B1 1st lien and Caa1 2nd lien ratings; outlook stable

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Rating Action: Moody's assigns CoreLogic go-private B2 CFR, B1 1st lien and Caa1 2nd lien ratings; outlook stableGlobal Credit Research - 31 Mar 2021$5.25 billion of debt ratedNew York, March 31, 2021 -- Moody's Investors Service ("Moody's") assigned CoreLogic, Inc. (New) (aka Celestial-Saturn Merger Sub Inc. and together with CoreLogic, Inc., "CoreLogic") a B2 corporate family rating ("CFR") and a B2-PD probability of default rating ("PDR"), while rating its proposed senior secured 1st lien revolver and term loan at B1 and senior secured 2nd lien term loan at Caa1. The outlook is stable.The rated debt and equity from affiliates of Stone Point Capital LLC ("Stone Point") and Insight Partners will fund the acquisition of 100% of the common stock of CoreLogic, Inc. in a go-private transaction, as well as pay related fees and expenses. The existing ratings at CoreLogic, Inc. will be withdrawn when the currently-rated debts are repaid. Following the close of the transaction, CoreLogic, Inc. (New) will be merged into CoreLogic, Inc. and become the borrower.RATINGS RATIONALEThe B2 CFR reflects high financial leverage above 7 times, but good interest coverage above 2 times and free cash flow to debt around 5%, expected in 2021. Financial leverage is expected to return to below 7 times by 2022, incorporating Moody's expectation for rapid and substantial debt repayment from free cash flow over the next 2 or more years. A very large nearly $3.5 billion sponsor equity contribution provides strong evidence to support our assessment of current enterprise value well in excess of the amount of the rated debt.All financial metrics cited reflect Moody's standard adjustments.Rating support is provided by stable and predictable business lines providing "must have" data and services to banks, insurance companies and the residential real estate industry. A somewhat narrow market focus leads to some customer concentration, but with high quality financial institutions. Tailwinds from favorable mortgage market conditions in 2021 and very low interest rates drive Moody's anticipation of substantial free cash flow available to repay debt. Revenue is expected to decline after 2021 given the strength of the current mortgage boom is likely to fade and certain mature businesses are in long term revenue decline. M&A and shareholder returns will compete for cash flow, so further borrowing is possible. The company will remain a cash tax payer despite the high debt burden. Interest rate risk from an all floating rate capital structure will be mitigated by a hedging strategy converting the interest obligations to fixed rates.CoreLogic's unique data and strong market position within the mortgage settlement services market is supported by long-standing relationships with many of the largest financial institutions. Moody's considers revenue and cash flow generally predictable.The company maintained solid financial performance through the 2020 and 2008/2009 economic cycles and during the years between, including years when mortgage originations declined or were weak. As CoreLogic's financial results reflect mortgage industry conditions, Moody's considers the company cyclical.Moody's expects some revenue declines in 2021, reflecting still solid home sale market conditions expected to remain supportive, aided by historically low mortgage interest rates, but also that the very high levels of mortgage financing activity in the past year are likely to abate. Adverse market conditions, including a more challenging housing market, regulatory scrutiny and rising interest rates, could develop and weigh on operating results. These pressures will be mitigated somewhat by growing demand for property intelligence and data analytics solutions, increasing regulation and compliance requirements, pricing increases and market share gains arising from the mortgage lending/servicing industry trend towards outsourcing.As a data and analytics service provider, CoreLogic does not have a material or unusual environmental impact. Certain of the products and services it offers can be used in the production of real estate related environmental impact analysis by their customers.Reputational risks surrounding data security, completeness and correctness are important social risks for CoreLogic. A loss of confidence by its customers in its data security and related matters could severely diminish its reputation. The loss of reputation could lead to customer losses, declining pricing power and encourage investment by competitors and new market entrants. The company invests in its data security that optimizes security versus threats. The company has never reported a large data security breach.As a private company owned by financial sponsors, CoreLogic's financial strategies are expected to be aggressive and opportunistic. The board of directors is controlled by Stone Point and Insight Partners. Among CoreLogic's expected near term capital allocation priorities are investing in the business, completing product-focused acquisitions, financial leverage reduction and cash returns to shareholders.Moody's considers CoreLogic's liquidity profile as good. CoreLogic is expected to maintain around $100 million of cash to ease the company's exposure to the housing industry cycle. Moody's also projects annual free cash flow of more than $200 million in 2021 and $300 million in 2022. There are $40 million of annual required amortization payments on the senior secured 1st lien term loan, payable quarterly.CoreLogic's undrawn $500 million revolver provides substantial external liquidity. The revolver is subject to compliance with a maximum 8.65x First Lien Net Leverage ratio applicable only when 35% drawn at quarter end. Moody's expects CoreLogic would maintain compliance with its financial covenant if it were measured for at least the 12 to 15 months. There are no financial covenants applicable to the term loans.The ratings assigned to the individual instruments are based on the probability of default of the company, reflected in the B2-PD PDR, as well as a family recovery of 50% of debt obligations assumed at default.The B1 (LGD3) rating assessment for the senior secured first lien credit facilities reflect their senior most ranking within the capital structure and first loss support provided by senior secured second lien term loan and unsecured claims. These facilities are secured on a first lien basis by substantially all assets and by the stock of the company's material domestic subsidiaries, which hold the vast majority of CoreLogic's assets. The credit facilities are further supported by upstream guarantees from the material domestic subsidiaries.The Caa1 (LGD6) rating assessment for the senior secured second lien credit facilities reflect their senior most ranking within the capital structure and first loss support provided by senior secured second lien term loan and unsecured claims.The stable outlook reflects Moody's expectations for low single digit revenue declines, EBITDA margins of over 33% and debt to EBITDA to fall below 7 times through the application of CoreLogic's substantial free cash flow to debt repayment.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be upgraded if Moody's expects 1) debt to remain under 6.0 times; 2) free cash flow above 6.0% of total debt; 3) balanced financial policies; and 4) good liquidity.The ratings could be downgraded if 1) revenue visibility or EBITA margins become pressured by increased competition, regulatory changes or other factors; 2) debt to EBITDA leverage is expected to remain above 7.0 times; 3) free cash flow to debt is anticipated below 3.0%; 4) liquidity deteriorates; or 5) CoreLogic pursues aggressive shareholder-friendly financial policies, including debt-funded acquisitions or shareholder returns.The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology...Issuer: Corelogic, Inc. (New).... Corporate Family Rating, Assigned B2.... Probability of Default Rating, Assigned B2-PD....Gtd Senior Secured 1st Lien Multi-Currency Revolving Credit Facility, Assigned B1 (LGD3)....Gtd Senior Secured 1st lien Term Loan, Assigned B1 (LGD3)....Gtd Senior Secured 2nd Lien Term Loan, Assigned Caa1 (LGD6)....Outlook is StableCoreLogic provides property and mortgage data and analytics, as well as loan processing and other services. Moody's expects 2021 revenues (including from discontinued operations) of about $2 billion.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, 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 issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.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.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Edmond DeForest VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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