OREANDA-NEWS. Fitch Ratings has assigned a 'BBB' rating to Dun & Bradstreet Corporation's (DNB) proposed senior notes due 2020. The proceeds from the offering are expected to be used to repay the borrowings outstanding under the company's revolving credit facility and for general corporate purposes. In addition Fitch has assigned a 'BBB' rating to the \$400 million delayed-draw Term Loan Facility, which DNB entered into on May 14, 2015. The company has not currently drawn on the Term Loan Facility. A full list of ratings follows at the end of this release.

The senior notes will be unsecured and will rank equally with all other unsecured senior indebtedness. The notes will be issued under the indenture dated March 14, 2006 and as supplemented on Dec. 2012, and June 2015. Terms are similar to previous issuances by DNB, and include:

--A limitation on liens (excluding standard carve-outs) of up to the greater of i) 10% of shareholder's equity or 2) \$450 million, as well as an accounts receivable securitization limit of \$200 million.
--Holders have the right to require DNB to repurchase the notes at 101% of par upon a change of control and a subsequent downgrade below investment grade. Change of control triggers include: acquisition by any person of 50% or more of DNB's voting stock; a majority of the current board members cease to be directors; a sale of all or substantially all of the company's assets; or a liquidation/dissolution of the company.

The Term Loan Facility permits DNB to draw a total of \$400 million with up to two drawdowns. Each drawdown must occur on or before Nov. 15, 2015 and will mature five years after the initial funded drawdown. The facility will require the maintenance of interest coverage and total debt to EBITDA ratios similar to those required under the Revolving Credit Facility.

Fitch estimates pro forma leverage to be at approximately 3.5x by the end of 2015 and leverage to approach 3x during year 2016. The Negative Outlook reflects Fitch's expectation that the company's credit metrics will remain elevated and outside the thresholds for a 'BBB' rating for an extended period and reflects the risk associated with the turnaround in the small business channel.

Fitch continues to believe that DNB can successfully execute its investment strategy and improve its operating performance over the next two to three years. However, Fitch notes there is limited capacity within the current ratings for operational missteps in light of the additional debt and de-levering delays back to Fitch's target leverage of 3x.

Fitch notes that DNB has solid free cash flow (FCF) generation (\$193.5 million after dividends for the LTM ended March 2015), strong EBITDA margins (above 30%), and levers that provide DNB with the ability to pay down debt. Management is committed to an investment-grade rating and Fitch believes DNB will prioritize debt repayments in order to de-lever.

On May 12, 2015, DNB completed its previously announced acquisition of Dun & Bradstreet Credibility Corporation (DBCC) for approximately \$320 million in cash (amount is subject to a post-closing purchase price adjustment for working capital). The purchase price was funded primarily with cash on hand, with the remaining amount funded through the revolving credit facility. The DBCC acquisition follows the \$125 million acquisition of NetProspex, announced in January 2015, and incremental operating investments which are expected to continue in order to drive top-line growth as part of DNB's long-term sustainable growth strategy.

Fitch believes the acquisitions of DBCC and NetProspex are in line with the company's stated strategy to target acquisitions that can improve DNB's operational capabilities and accelerate revenue growth. Specifically, the acquisition of DBCC offers DNB access to management expertise and a platform to address the declines experienced within its small business channel.

In 2010, Dun & Bradstreet divested their Self-Awareness Solutions business to DBCC, formed by private equity firm Great Hill Partners and DBCC's current management teams, and entered into a data license partnership. As a part of the transaction, DBCC was granted a license to use D&B's brand specifically for the 'credit-on-self' solution (under a royalty arrangement), which allowed small- and medium-sized businesses in North America to manage and build their own credit. DNB retained the core and widely used 'credit-on-others' DNBi business. DBCC has since been able to turn around the operation and successfully grow a customer base of small businesses. The acquisition could potentially remove the drag on DNB's small-business channel. The acquisition also brings the management team at DBCC under DNB.