Moody's Investor Serice – Rating Action: Moody's upgrades Penton's CFR to B2; outlook stable

Global Credit Research – 09 Nov 2015
New York, November 09, 2015 — Moody’s Investors Service (Moody’s) has upgraded Penton Operating Holdings,
Inc.’s (Penton) corporate family rating (CFR) to B2 from B3 and the second lien term loan to Caa1 from Caa2. The
rating for the first lien credit facility was affirmed at B1. The outlook is stable.
The upgrade of the CFR reflects the reduction in leverage to 5.3x as of Q3 2015 and the success growing its
higher margin trade show and digital divisions which has offset significant declines in its Print division. Leverage
has declined due to EBITDA growth aided by recent acquisitions and approximately $18 million of debt repayment
in the first three quarters of 2015.
The first lien debt was affirmed at B1 despite the upgrade of the CFR as the amount of first lien debt accounts for a
more significant part of the capital structure which reduces the amount of rating lift from the $196 million second
lien term loan.
The debt is jointly borrowed by two subsidiaries of the company, Penton Media, Inc. and Penton Business Media,
Moody’s has taken the following rating actions:
Issuer: Penton Operating Holdings, Inc.
.Corporate Family Rating, upgraded to B2 from B3
.Probability of Default Rating, upgraded to B2-PD from B3-PD
.Outlook, Stable
Issuer: Penton Business Media, Inc. (Co-Borrowed by Penton Media, Inc.)
.$50 million sr sec revolver due 2018 affirmed at B1 (LGD3)
.$446 million 1st lien term loan due 2019 affirmed at B1 (LGD3)
.$196 million 2nd lien term loan due 2020 upgraded to Caa1 (LGD5) from Caa2 (LGD5)
.Outlook, Stable
Penton’s B2 CFR reflects its leverage of 5.3x (including Moody’s standard adjustments) as of Q3 2015 and its
cyclical business profile. The ratings also reflect large declines in Print revenues which currently account for
approximately 32% of LTM total revenue as of Q3 2015. However, as the Print business has lower overall
EBITDA margins than its Digital and Events segments, it accounts for a smaller percentage of overall EBITDA and
Print is expected to continue to decrease as a percentage of total revenue going forward. The company will need
to continue carefully managing the transition from Print to Digital which will require cost cutting at declining print
operations while supporting growing digital and data products.
The rating is supported by the company’s improved business mix between print and digital content, the established
position in the trade show industry, and strong position in the niche verticals where it operates. The focus on five
different industry segments provides diversification and reduces the sensitivity the company has to any one
industry. EBITDA margins are good and have remained in the 35% range over the past several years. Moody’s
expects Penton to generate over $50 million of free cash flow annually which may be used to help fund future
acquisitions which would contribute to EBITDA growth.
Moody’s expects Penton to have good liquidity over the next twelve months supported by over $50 million in free
cash flow due to minimal capex spending of about $15 million. Cash on the balance sheet is $6 million pro-forma
for the MRO Network acquisition and the $50 million revolver is undrawn. There are no additional amortization
payments required on the first lien term loan as the company has prepaid the amortization payments until maturity.
The term loans have no financial covenants. The revolver will be subject to a maintenance covenant when greater
than 25% of the aggregate amount of the revolver is drawn. When this condition is met, the company will be
subject to a First Lien Net Leverage Ratio (as defined) of 6x. We expect substantial cushion against this covenant
over the next year.
The stable outlook reflects Moody’s expectation that Penton will continue to modestly grow EBITDA as the
percentage of its lower margin print business declines and is offset by its higher margin digital business.
An additional upgrade is unlikely in the near term given the recent upgrade. However, the ratings could be
upgraded if Penton is able to reduce leverage below 4.25x on a sustained basis while demonstrating positive
organic revenue growth and good free cash flow. Confidence that the private equity sponsors intend to maintain
leverage below this level would also be required. Additionally, a rating upgrade would be predicated on Penton
maintaining strong EBITDA margins and good liquidity.
The ratings could be downgraded if the company’s revenues decline materially due to economic weakness or
operational underperformance so that leverage rose above 5.5x. A debt funded equity friendly transaction or
acquisition that led to leverage above this level would also result in a downgrade as would a failure to maintain an
adequate liquidity profile.
Penton Operating Holdings, Inc. (“Penton”), headquartered in New York, NY, is a diversified business-to-business
media company providing trade show, print, and digital products and services. Penton emerged from Chapter 11
bankruptcy protection in March 2010. Revenue for the twelve months ended September 30, 2015 was $369
The principal methodology used in these ratings was Global Publishing Industry published in December 2011.
Please see the Credit Policy page on for a copy of this methodology.
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Scott Van den Bosch
VP – Senior Credit Officer
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street