Ivanti Software, Inc. -- Moodys affirms Ivanti Softwares B3 CFR, outlook stable
Summary
Cherwells strong product offerings in ITSM and ESM, in addition to its large existing customer base, will enhance Ivantis product portfolio and diversity.Affirmations:..Issuer: Ivanti Software, Inc..... Corporate Family Rating, Affirmed B3.... Probability of Default Rating, Affirmed B3-PD....Senior Secured 1st Lien Bank Credit Facility, Affirmed B2 (LGD3)....Senior Secured 2nd Lien Bank Credit Facility, Affirmed Caa2 (LGD6)Assignments:..Issuer: Ivanti Software, Inc.....Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)Outlook Actions:..Issuer: Ivanti Software, Inc.....Outlook, Remains StableRATINGS RATIONALEIvantis B3 CFR reflects the companys very high leverage, aggressive financial policies and significant execution risks associated with the acquisition and integration of Cherwell, MobileIron and Pulse Secure. Moodys expects that Ivanti will maintain positive annualized free cash flow to debt of approximately 1-3% through 2022.Moodys regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Owned by private equity funds associated with TA Associates and Clearlake Capital, Ivanti will likely maintain an aggressive financial strategy, including potential debt funded M&A activity and dividend payments.The stable outlook reflects Ivantis good liquidity and Moodys expectation that over the next 12-18 months Ivanti will grow EBITDA through a combination of cost reduction activities and organic growth across the consolidated business such that leverage will decline below 7x.Ivantis good liquidity is supported by expectations for a cash balance of approximately $80 million at the close of the transaction, an undrawn $175 million revolving credit facility and modest but positive free cash flow over the next year.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be downgraded if Ivanti is not on track to reduce leverage below 7x over the next 12-18 months or if free cash flow generation is expected to be negative on other than a temporary basis. The company is headquartered in Utah and owned by funds affiliated with private equity sponsors Clearlake Capital and TA Associates.The principal methodology used in these ratings was Software Industry published in August 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1130740. Stephen Morrison Asst Vice President - Analyst Corporate Finance Group Moodys Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A.