U.S. markets closed
  • S&P 500

    3,825.33
    +39.95 (+1.06%)
     
  • Dow 30

    31,097.26
    +321.86 (+1.05%)
     
  • Nasdaq

    11,127.84
    +99.14 (+0.90%)
     
  • Russell 2000

    1,727.76
    +19.77 (+1.16%)
     
  • Crude Oil

    108.46
    +2.70 (+2.55%)
     
  • Gold

    1,812.90
    +5.60 (+0.31%)
     
  • Silver

    19.85
    -0.50 (-2.44%)
     
  • EUR/USD

    1.0426
    -0.0057 (-0.54%)
     
  • 10-Yr Bond

    2.8890
    -0.0830 (-2.79%)
     
  • GBP/USD

    1.2088
    -0.0087 (-0.72%)
     
  • USD/JPY

    135.1900
    -0.5380 (-0.40%)
     
  • BTC-USD

    19,209.36
    -49.68 (-0.26%)
     
  • CMC Crypto 200

    420.84
    +0.70 (+0.17%)
     
  • FTSE 100

    7,168.65
    -0.63 (-0.01%)
     
  • Nikkei 225

    25,935.62
    -457.38 (-1.73%)
     

Trans Union, LLC -- Moody's affirms rating to TransUnion's Ba2 CFR and sr secured ratings; outlook revised to stable from negative

·18 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Rating Action: Moody's affirms rating to TransUnion's Ba2 CFR and sr secured ratings; outlook revised to stable from negativeGlobal Credit Research - 22 Mar 2022Over $3.7 billion of rated debtNew York, March 22, 2022 -- Moody's Investors Service ("Moody's") affirmed TransUnion's Ba2 corporate family rating ("CFR") and Ba2-PD probability of default rating ("PDR"). Moody's also affirmed Trans Union, LLC's senior secured 1st lien credit facilities at Ba2. The speculative grade liquidity rating ("SGL") is SGL-1. The outlook was revised to stable from negative.In February, TransUnion announced the $515 million acquisition of Verisk Analytics, Inc.'s ("Verisk," Baa2 stable) financial services business unit ("VFS"). In 2021, TransUnion sold its non-core healthcare revenue cycle management business for $1.4 billion (after-taxes), purchased Sontiq, a provider of digital identify protection and security solutions for $638 million in cash, and acquired Neustar, Inc's marketing, risk and communications solutions businesses ("Neustar") for $3.1 billion in cash.RATINGS RATIONALE"Our expectation for a rapid decline of pro forma debt to EBITDA drives today's revision of the outlook to stable from negative. Leverage peaked at around 5.8 times after the Neustar and Sontiq acquisitions and healthcare sales were announced, declining to below 4.5 times by the end of 2022, though, but before the VFS purchase and over $1 billion in debt was repaid," said Edmond DeForest, Moody's Senior Vice President.The Ba2 CFR reflects TransUnion's growing revenue size and earnings diversity, as well as Moody's expectations for debt to EBITDA to drop to around 4.0 times over the next 12 to 18 months. Leverage reduction will come from both organic revenue growth fueled profit expansion and debt repayment. Moody's expects good organic constant currency revenue growth of at least 5% and expanding profitability rates, driven by acquisition-related cost management initiatives and the benefits of technology investments, over the next 12 to 18 months. The sold healthcare business was especially profitable, although slow growing. The loss of the strong earnings from the healthcare business leads Moody's to anticipate approximately 35% EBITDA margins in 2022, down by about 500 basis points compared to 40% EBITDA margins for the LTM period ended September 30, 2021, before the healthcare unit was sold. That said, Moody's anticipates rising rates of profitability from these lower, although still robust, levels.All financial metrics cited reflect Moody's standard adjustments.TransUnion's credit profile is supported by its sustainable market position as one of the three principal consumer credit bureaus in the US with high barriers to entry. The company's recent performance has benefited from the strong consumer borrowing trends and a significant portion of its revenues are driven by the demand for information solutions by its customers related to new marketing and customer acquisition activity. However, TransUnion's critical role in consumer finance and its possession of large amounts of consumer private data increase regulatory and information security risks. The heightened awareness after many high profile breaches, ongoing investments in improved IT security platforms and policies and some degree of protection under insurance policies mitigate the risk of a significant financial and business impact from information security breaches. The company is also subject to the supervision and examination by the Consumer Financial Protection Board (CFPB) under the Dodd-Frank Act and by the FTC (through the Fair Credit Reporting Act). In addition, they are regulated by a number of state agencies. While regulatory risks are high for the industry, TransUnion has a track record of managing the business amid increasing scrutiny and rising compliance costs without experiencing any material impact on their businesses.In past several months, Transunion announced three large acquisitions totaling over $4.2 billion and the divestiture of its Healthcare business for around $1.4 billion, net of taxes. The source of funds for the acquisitions was the business unit sale and debt. Moody's estimates that TransUnion's debt to EBITDA will decline from about 4.7 times as of December 31, 2021 pro forma for announced acquisitions, the divestiture and $400 million of debt repaid during the current fiscal quarter to around 4.0 times, while free cash flow to debt will likely rise from below 8% as of December 31, 2021 to around 12% to 14%, both over the next 12 to 18 months. While TransUnion has had a history of growing via debt-funded acquisitions, the company has also shown an ability to reduce financial leverage quickly. Moody's considers TransUnion to have balanced, although opportunistic, financial policies, with financial leverage typically maintained between 3.5 and 4.5 times, except following periodically large, debt-funded acquisitions.About two-thirds of VFS's revenue and earnings come from its Argus Information & Advisory Services ("Argus") business, which is a long-standing strategic partner of TransUnion. Argus provides authoritative and differentiated insights for credit and debit card accounts and demand/deposit accounts ("DDA") spending behavior through data that is sourced from a consortia of banks and card issuers that spans 90% of credit cards and 45% of DDAs in the U.S. and large portions of cards issued in the UK, Canada and Australia. Argus helps financial institutions increase financial inclusion, acquire new accounts, make risk decisions and mitigate fraud. By acquiring Argus, TransUnion believes it can enhance value to consortia members and better utilize the full wallet view of the consumer to deliver actionable insights, modernize delivery of Argus products, expand Argus' data coverage and addressable market and leverage Argus' insights to improve fraud mitigation, risk decisioning, and new customer targeting. According to TransUnion, VFS had 2021 revenue and EBITDA of $143 million and $41 million, respectively.The acquisition of Sontiq will allow TransUnion to expand its consumer services into the ID protection market. The Neustar acquisition will bolster TransUnion's product capabilities within its marketing, fraud and communications solution sets in the US. However, integration risks from all three purchases will be elevated over the next 12 months. The divestiture of the healthcare business will allow the company to focus on its core credit and identity solutions businesses.Trans Union, LLC is an indirect subsidiary of TransUnion and the borrower of the rated debt. TransUnion does not guarantee the rated debts and does not have any material assets, liabilities, revenues, expenses or operations of any kind other than its ownership investment in TransUnion Intermediate Holdings, Inc., which is the direct parent of Trans Union, LLC and does provide a secured guarantee of the rated debt.The Ba2 rating and LGD3 loss given default assessment for the senior secured credit facilities reflect the Ba2-PD PDR and the expected loss given default for the rated debt obligations. The loans are secured by a first priority interest in substantially all assets of Trans Union, LLC and its subsidiaries, and has upstream guarantees secured on a 1st priority basis from its primary subsidiaries.The SGL-1 liquidity rating reflects TransUnion's very good liquidity profile over the next 12 to 15 months, which primarily incorporates cash balances expected to remain over $500 million at all times, expectations for $500 million of free cash flow (before transaction-related expenses) and full availability under its $300 million revolving credit facility, which matures in December 2024. Moody's expects TransUnion will have wide headroom under financial covenants applicable to its revolver and series A term loan; the financial covenants do not apply to the series B term loans.The stable outlook reflects Moody's expectations for debt to EBITDA to decline and be maintained around 4.0 times and free cash flow as a percentage of debt to grow and be sustained above 10%.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoody's could upgrade TransUnion's ratings if the company maintains solid revenue and earnings growth, sustains debt to EBITDA below 3.5 times, maintains free cash flow approaching the mid-teens percentages of debt, establishes a track record of conservative financial policies and gains additional financial flexibility by reducing the proportion of secured to total debt.The ratings could be downgraded if Moody's expects that debt to EBITDA will be sustained above 4.5 times and free cash flow will remain below 8% of total debt.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.The following ratings/assessments are affected by today's action:..Issuer: TransUnion.... Corporate Family Rating, affirmed Ba2.... Probability of Default Rating, affirmed Ba2-PD....Outlook, changed to Stable from Negative..Issuer: Trans Union, LLC....Senior Secured 1st Lien Bank Credit Facility, Affirmed Ba2 (LGD3)....Outlook, changed to Stable from NegativeTransUnion, based in Chicago, IL, provides consumer credit reports and information and risk management solutions and operates in over 30 countries. Moody's expects 2022 revenue of over $3.7 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.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 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. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​