SESAC outlook stable, says Wall Street ref


Moody'sMoody’s Investors Service likes the predictability of income that is the basis of performance rights organization SESAC’s business model, and believes that moves to de-lever the company can help it moving forward. But a pending antitrust lawsuit could be the fly in the ointment.

Private equity firm Rizvi Traverse is in the process of buying the company for $590.5M. A number of moves have left it with a Corporate Family Rating of B2, a B2-PD Probability of Default Rating and a stable outlook.

Moody’s says its current 6X leverage is on the high side, and expects to see it lowered to into the high end of the 5X range over the next year and a half.

It notes that it is much smaller than its two chief competitors, ASCAP and BMI, and that it has a history of aggressive financial actions, including dividends and preferred share redemptions.
The stability of the contract-based business model, with incremental income increase built in, contributes to the stable outlook, particulary if it does in fact take steps to de-lever to 5X.

To improve its rating, Moody’s says it will have to get its leverage into the 4X range.

A downgrade is possible if it remains in above 6X, and if it continues to pour money into shareholder distributions. And Moody’s added, “To the extent any plaintiff is successful in the pending lawsuits against the company resulting in significant damages above the contemplated litigation escrows, Moody’s could lower the rating.”