Dodge Data & Analytics LLC -- Moody's assigns first-time B3 CFR to Dodge Data & Analytics; outlook stable

Rating Action: Moody's assigns first-time B3 CFR to Dodge Data & Analytics; outlook stableGlobal Credit Research - 24 Jan 2022New York, January 24, 2022 -- Moody's Investors Service ("Moody's") assigned a first time B3 Corporate Family Rating (CFR) and B3-PD Probability of Default Rating to Dodge Data & Analytics LLC (d/b/a Dodge Construction Network (DCN)). Moody's also assigned a B2 instrument rating to the proposed first lien credit facilities and Caa2 instrument rating to the proposed second lien term loan. The outlook is stable.Proceeds from the credit facilities plus approximately $429 million of new and roll over common equity from funds managed by private equity firms Symphony Technology Group (STG) and Clearlake Capital Group, L.P. (Clearlake) will be used to finance the recapitalization of DCN (excluding transaction fees, expenses and balance sheet cash).Assignments:..Issuer: Dodge Data & Analytics LLC.... Corporate Family Rating, Assigned B3.... Probability of Default Rating, Assigned B3-PD....Gtd Senior Secured 1st Lien Revolving Credit Facility due 2027, Assigned B2 (LGD3)....Gtd Senior Secured 1st Lien Term Loan due 2029, Assigned B2 (LGD3)....Gtd Senior Secured 2nd Lien Term Loan due 2030, Assigned Caa2 (LGD5)Outlook Actions:..Issuer: Dodge Data & Analytics LLC....Outlook, Assigned StableThe assigned ratings are subject to review of final documentation and no material change in the terms and conditions of the transaction as advised to Moody's.RATINGS RATIONALEThe B3 CFR reflects the credit risks associated with DCN's relatively small revenue base, narrow market focus, and high debt/EBITDA leverage (Moody's adjusted). Moody's expects 2021 pro-forma adjusted debt leverage of approximately 7x (including cost synergies and expensing software development costs) that will decline modestly in 2022 driven by scheduled debt amortization and projected EBITDA expansion. The rating also factors in the potential for the company to pursue acquisitions over the intermediate term which could constrain deleveraging efforts.In April 2021, Dodge Data & Analytics (Dodge Data) acquired The Blue Book Building & Construction Network (Blue Book). Both companies have operated in different niches of the construction industry for over 100 years. The combination of the companies created a subscription-based, integrated construction intelligence and collaboration platform offering proprietary project data, analytical tools, and advertising and marketing solutions for commercial construction businesses. In October 2021, Dodge Construction Network (DCN) was formed as the umbrella brand for Dodge Data and The Blue Book.DCN benefits from a leading market position as a provider of data, analytics, digital workflow solutions and targeted marketing services to professionals in the U.S. commercial construction industry. The company has a largely recurring revenue base (over 95% of revenues in 2021) and a wide-ranging product suite focused on providing leads and market data to its customers. DCN's top-line predictability is also bolstered by high client retention rates over 85% among its mix of Enterprise and SMB (Small-Medium-Business) customer base and the company's strong overall competitive position within its targeted market for project information and construction advertising. Additionally, the company's modest capital expenditure requirements should lead to solid cash flow generation. Moody's expects free cash flow to debt of around 5% in 2022.Governance risks and financial policies are key considerations given its private-equity ownership. Moody's views DCN's financial policy to be relatively aggressive given the high pro forma leverage, with the potential for debt funded acquisitions and shareholder returns over the medium term. The absence of public financial disclosure and lack of board independence are also considered in the company's credit profile.DCN has good liquidity, supported by $20 million of cash at the close of the transaction, an undrawn $40 million revolving credit facility due 2027, and Moody's expectation of $30 million to $35 million of free cash flow in 2022. The proposed revolving credit facility is expected to contain a total net first lien leverage covenant of 9x triggered when 40% or more is outstanding. Moody's does not anticipate the covenant to be tested and expects that DCN will maintain strong cushion over at least the next year.The stable ratings outlook reflects our view that the U.S. commercial construction industry will grow modestly to support low-single digit organic revenue growth and adjusted EBITDA margins sustained around 40% resulting in de-leveraging closer to the 6.5x area (Moody's adjusted) over the next year.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be upgraded if revenue growth and EBITDA expansion lead to sustained reduction in total debt to EBITDA sustained around 6x (Moody's adjusted) with free cash flow to adjusted debt over 5%. The company would also need to maintain a good liquidity position and exhibit prudent financial policies to be considered for an upgrade.The ratings could be downgraded if DCN does not generate positive organic revenue growth or if EBITDA growth is insufficient to maintain positive free cash flow generation. DCN could also be downgraded if market share erodes, liquidity weakens, or the company maintains aggressive financial policies that prevent meaningful deleveraging.STRUCTURAL CONSIDERATIONSThe B2 rating on DCN's proposed senior secured first lien term loan due 2029 and revolving credit facility due 2027 reflects the debt's senior position in the company's capital structure, above the $130 million senior secured second lien term loan.As proposed, the new credit facilities for DCN are expected to provide covenant flexibility that if utilized could negatively impact creditors. Notable terms include the following:Incremental debt capacity up to the greater of 100% of closing date LTM EBITDA and 1x pro forma consolidated EBITDA plus unused capacity under the general debt basket (such basket to be shared with the 2nd lien term loan), plus unlimited amounts subject to 5x net first lien leverage ratio (if pari passu secured). For junior indebtedness secured by collateral, either 0.5x outside the closing date senior secured leverage or 1.75x interest coverage ratio. Amounts up to the greater of 200% of closing date LTM EBITDA and 2x pro forma consolidated EBITDA may be incurred with an earlier maturity date than the initial term loans.There are no express "blocker" provisions which prohibit the transfer of specified assets to unrestricted subsidiaries; such transfers are permitted subject to carve-out capacity and other conditions. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. There are no express protective provisions prohibiting an up-tiering transaction.The above are proposed terms and the final terms of the credit agreement may be materially different.Headquartered in Hamilton, NJ, Dodge Construction Network is a provider of commercial construction project data, market forecasting and analytics services, advertising and marketing solutions, and workflow integration solutions for the North American pre-construction industry. DCN generated around $204 million of pro-forma revenue in 2021. The company is owned by Symphony Technology Group and Clearlake Capital Group, L.P.The principal methodology used in these ratings was Business and Consumer Services published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287897. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.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. 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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. 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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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.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. Raina Patel Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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