Moody's Places Cardtronics (CATM) on Review for Downgrade
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Moody's Investors Service ("Moody's") has placed Cardtronics, Inc.'s (Nasdaq: CATM) credit ratings under review for downgrade, including the company's Ba2 Corporate Family Rating (CFR), Ba2-PD Probability of Default Rating ("PDR"), and the Ba3 rating on Cardtronics' $250 million senior unsecured notes. The review was prompted by the announcement of the company's planned $500 million all-cash acquisition (including transaction costs) of DirectCash Payments Inc. ("DirectCash"). Cardtronics' leverage, which approximated 2x (Moody's adjusted) as of June 30, 2016, will rise by 1x as a result of the debt-financed transaction. However, given the company's healthy free cash flow production, a downgrade, if any, is not expected to exceed one notch. The SGL-2 rating is not affected but may change depending on the liquidity profile upon consummation of the acquisition.
Issuer: Cardtronics, Inc.
On Review for Downgrade:
Corporate Family Rating, Placed on Review for Downgrade, currently Ba2
Probability of Default Rating, Placed on Review for Downgrade, currently Ba2-PD
Senior Unsecured Notes maturing 2022, Placed on Review for Downgrade, currently Ba3 (LGD4)
Outlook revised to Rating Under Review from Stable
The rating review reflects Moody's view that Cardtronics' planned acquisition will improve the company's scale, but will result in a more aggressively levered capital structure. Moody's review will focus on the company's pro forma capital structure, liquidity profile, expected pace of debt reduction, and future operating strategy, including synergies that may be realized after the acquisition is consummated. Moody's review will also take into account the risks relating to the potential loss of Cardtronics' largest customer relationship in mid 2017 as well challenges facing the company due to the limited long term growth potential for cash-based transactions resulting from the secular shift to electronic forms of payments.
The principal methodology used in these ratings was "Business and Consumer Service Industry" published in October 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
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