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Nielsen Company (Luxembourg) S.a.r.l., The -- Moody's affirms Nielsen's Ba3 CFR, Ba1 sr. sec. debt ratings and B2 sr. unsec. notes ratings; outlook revised to positive

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Rating Action: Moody's affirms Nielsen's Ba3 CFR, Ba1 sr. sec. debt ratings and B2 sr. unsec. notes ratings; outlook revised to positiveGlobal Credit Research - 29 Mar 2021Approximately $7.7 billion of existing rated debt impactedNew York, March 29, 2021 -- Moody's Investors Service, ("Moody's") has affirmed Nielsen Holdings plc ("Nielsen" or the "company") Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating (PDR), Ba1 ratings on the senior secured bank credit facilities at Nielsen Finance LLC ("Nielsen Finance") and Nielsen Holding and Finance B.V., a Dutch borrower, and B2 ratings on the senior unsecured notes at Nielsen Finance and The Nielsen Company (Luxembourg) S.à.r.l. Concurrent with this rating action, Moody's withdrew the rating on the $150 million outstanding 5.5% senior notes due 2021, which have been fully repaid. The outlook was revised to positive from negative.Following is a summary of today's rating actions:Affirmations:Issuer: Nielsen Holdings plc..Corporate Family Rating, Affirmed at Ba3..Probability of Default Rating, Affirmed at Ba3-PDIssuer: Nielsen Finance LLC (Co-Borrowers: TNC (US) Holdings Inc. and Nielsen Holding and Finance B.V.)..$ 850 Million Senior Secured Revolving Credit Facility due 2023, Affirmed at Ba1 (LGD2)Issuer: Nielsen Finance LLC..$1,125 Million ($745 Million outstanding) Senior Secured Term Loan A due 2023, Affirmed at Ba1 (LGD2)..$2,303 Million ($1,603 Million outstanding) Senior Secured Term Loan B-4 due 2023, Affirmed at Ba1 (LGD2)..E 545 Million ($242 Million USD equivalent outstanding) Senior Secured Euro Term Loan B-2 due 2023, Affirmed at Ba1 (LGD2)..$ 550 Million ($430 Million outstanding) Senior Secured Term Loan B-5 due 2025, Affirmed at Ba1 (LGD2)Issuer: Nielsen Holding and Finance B.V...E 660 Million ($630 Million USD equivalent outstanding) Senior Secured Euro Term Loan B-3 due 2025, Affirmed at Ba1 (LGD2)Issuer: Nielsen Finance LLC (Co-Borrower: Nielsen Finance Co.)..$2,300 Million ($825 Million outstanding) 5.000% Senior Unsecured Notes due 2022, Affirmed at B2 (LGD5)..$1,000 Million 5.625% Senior Unsecured Notes due 2028, Affirmed at B2 (LGD5)..$ 750 Million 5.875% Senior Unsecured Notes due 2030, Affirmed at B2 (LGD5)Issuer: The Nielsen Company (Luxembourg) S.à.r.l...$500 Million 5.000% Senior Unsecured Notes due 2025, Affirmed at B2 (LGD5)Withdrawals:Issuer: The Nielsen Company (Luxembourg) S.à.r.l...$625 Million ($150 Million outstanding) 5.500% Senior Unsecured Notes due 2021, Withdrawn, Previously Rated B2 (LGD5)Speculative Grade Liquidity Actions:Issuer: Nielsen Holdings plcSpeculative Grade Liquidity, Remains SGL-2Outlook Actions:Issuer: Nielsen Holdings plc.....Outlook, Changed to Positive from NegativeIssuer: Nielsen Finance LLC.....Outlook, Changed to Positive from NegativeIssuer: The Nielsen Company (Luxembourg) S.à.r.l......Outlook, Changed to Positive from NegativeIssuer: Nielsen Holding and Finance B.V......Outlook, Changed to Positive from NegativeRATINGS RATIONALEThe affirmation of the Ba3 CFR reflects Moody's expectation that Nielsen's constant currency organic revenue growth will land in the low-to-mid-single digit percentage band, total debt to EBITDA leverage will decline to the 4x area and free cash flow (FCF) to debt will improve to the mid-to-high single digit percentage range (both metrics are Moody's adjusted, excluding one-time spin-related cash costs) by the end of this year, consistent with the medians for Ba3-rated issuers. Strengthening debt protection measures are attributable to the recent sale of the Global Connect ("Connect") business, which was characterized by challenged organic revenue growth, narrower operating margins and weaker cash flow generation compared to the residual Global Media ("Media") business. Connect was sold to private equity firm, Advent International, for $2.7 billion in cash (less deductions based on closing cash levels, debt, debt-like items and working capital) as disclosed in the company's Form 8k filing dated 11 March 2021 [1]. The improvement in credit metrics is also facilitated by Nielsen's planned repayment of $2.28 billion of debt with the Connect sale proceeds [1]. Specifically, the company has repaid approximately $1.3 billion of the senior secured term loan facilities and redeemed the $150 million outstanding 5.5% senior unsecured notes, both of which occurred in March. The company plans to redeem the $825 million outstanding 5.0% senior unsecured notes by early April. Upon extinguishment of the notes, Moody's will withdraw the rating.The revision of the outlook to positive from negative is forward-looking and reflects Moody's view that Nielsen will prioritize deleveraging via a combination of debt reduction with free cash flow generation and EBITDA growth in the mid-single digit percentage range leading to leverage approaching 3.7x (Moody's adjusted) and adjusted EBITDA margins rising to the 42%-44% area by 2022. It also embeds improved corporate governance given management's commitment to de-lever to a target leverage of 3x-3.5x on an as-reported basis by 2023 (equivalent to around 3x-3.5x Moody's adjusted) and an expectation that annual dividends will remain low in the $85 million to $90 million range to support higher FCF generation for voluntary debt repayment. The outlook revision reflects Moody's forecast for a global economic recovery following the economic recession triggered by the COVID-19 pandemic. Moody's projects global GDP will expand 5.3% in 2021 (4.7% in the US) and 4.5% in 2022 (5.0% in the US).Following the Connect sale and exit of smaller non-core businesses, Moody's believes Nielsen's Media business will be more effective at focusing its resources and investments on new growth-oriented scalable solutions in its core measurement and data analytics space, leading to further improvement in debt protection measures. This includes single audience measurement across multiple platforms (i.e., streaming and broadcast), extending into overseas markets and verticals outside the traditional consumer packaged goods (CPG) client base in the audience outcomes segment and reorienting its metadata and analytics services to target high growth ad-supported and non-ad supported content streaming platforms. Further, Nielsen's management team has introduced incentives in the company's culture to focus innovation and strategic direction to be more aligned with industry secular growth trends.Nielsen's Ba3 CFR reflects the company's leading international positions within its core Media business segments, comprising audience measurement (73% of revenue), audience outcomes (20%) and Gracenote content services (7%); relatively high entry barriers with high client switching costs; long-standing customer relationships of which roughly 80% of client revenue is contracted at the start of each year; and high pro forma adjusted EBITDA margins in the 42% range. The company's ratings are the foremost metrics used to determine the value of programming and advertising in US television and streaming advertising markets and the industry's benchmark on which advertising is bought and sold. Nielsen's market position is solidified by its importance as an independent third party measurement standard, or currency, which is accepted by advertisers and media companies. The rating also considers Nielsen's investments in new product offerings to adapt to shifts in advertising spend and consumer viewing habits beyond traditional platforms.The Ba3 rating also embeds a more narrowly focused business after the Connect sale, with reduced revenue that is concentrated in the US (roughly 83% of revenue) offset by mid-single digit organic revenue growth prospects, higher margins and improved FCF generation. A further challenge includes the moderately high pro forma financial leverage of 4.5x (Moody's adjusted) at 31 December 2020 subsequent to the Connect spin, albeit expected to decline by year end 2021. While cyclical and secular spending pressures exist, Nielsen's sizable contractual revenue provides some cushion against reduced client spend in short-cycle products and verticals that have been more impacted by the recession and lingering effects of the pandemic (e.g., CPG, automotive, non-grocery retail and sporting events), and are likely to experience a lag as the global economy rebounds.The rating also recognizes that Nielsen generates revenue chiefly from publishing clients that provide ad-supported video-on-demand (AVOD) streaming and other ad-supported media (i.e., traditional cable, broadcast TV and radio) against a backdrop of strong industry growth in the non-ad supported streaming sub-segment (includes subscription video-on-demand (SVOD) and premium video-on-demand (PVOD) platforms), which currently accounts for the lion's share of streaming distribution. Moody's is constructive on Nielsen's ability to increase penetration into non-ad supported streaming platforms by increasing SVOD/PVOD demand for new product offerings from Nielsen's cross-media viewing and audience measurement services and Gracenote's content services (i.e., metadata for streaming, content analytics, ID and workflow tools).Over the next 12-15 months, Moody's expects Nielsen to maintain good liquidity (SGL-2 Speculative Grade Liquidity) supported by positive free cash flow generation in the range of 4% of total debt (Moody's adjusted) or 7% excluding one-time spin-related cash costs, solid cash levels (cash balances totaled $610 million at 31 December 2020 or $578 million pro forma for the Connect spin-off) and access to an undrawn $850 million revolving credit facility (RCF) maturing in 2023.The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of corporate assets arising from the current weakness in US and European economic activity and gradual recovery over the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around Moody's forecasts is unusually high. Moody's regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.From a governance standpoint, Moody's view favorably the separation of the weaker performing Connect business, modest dividend and establishment of a public leverage target because this will facilitate debt reduction and efficient capital allocation strategies that are better aligned with Nielsen's growth objectives. Moody's believes this reflects a healthier corporate governance profile since it will lead to a more manageable debt capital structure and improved cash flow generation for deleveraging and strategic investing to develop new services and integrated offerings that are relevant to clients' expanding measurement and analytics requirements.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSA ratings upgrade could occur if Nielsen demonstrates further client penetration into non-ad supported SVOD/PVOD content streaming services, constant currency organic revenue growth in the mid-single digit percentage range and increasing adjusted EBITDA margins approaching the 42%-44% area. Additionally, upward rating pressure could occur if Moody's expects that total debt to EBITDA will decline below 3.75x (Moody's adjusted) and free cash flow to debt (Moody's adjusted) will improve to the 5% to 6% range.Ratings could be downgraded if EBITDA margins contracted or debt levels increased resulting in total debt to EBITDA above 4.5x (Moody's adjusted) on a sustained basis and free cash flow generation weakened to below 3% of adjusted debt due to deterioration in operating performance. A deterioration in liquidity could also result in ratings pressure.With headquarters in Oxford, England and New York, NY, and operations in 60 countries, Nielsen Holdings plc is a global measurement and data analytics company providing audience measurement, audience outcomes and content metadata solutions. Revenue totaled approximately $6.3 billion for the fiscal year ended 31 December 2020. Pro forma for the Connect business spin-off, revenue totaled roughly $3.4 billion in fiscal 2020.The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1037985. 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. 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 outcome 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.REFERENCES/CITATIONS[1] Nielsen's Form 8-K filing dated 11 March 2021 (from EDGAR)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. Gregory A. 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