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| | Moody’s Investors Service Assigns B3 Corporate Family Rating To Sedgwick Claims Management Services, Inc. Rating Indicates Stable Outlook.
By Lonce LaMon with News Release From Moody's Investors Service - March 2, 2016
Moody’s Investor’s Service assigned B3 corporate family and B3-PD probability of default ratings to Sedgwick Claims Management Services, Inc. (Sedgwick CMS). Moody’s has withdrawn the B3 corporate family and B3-PD probability of default ratings from the group’s predecessor holding company, Sedgwick Inc. This is because the later was merged into Sedgwick CMS in 2014. The rating outlook is stable.
The ratings rationale is that Sedgwick CMS is an indirect wholly-owned subsidiary of Sedgwick, Inc. (together with its subsidiaries, “Sedgwick”). Sedgwick’s ratings reflect its status as the largest U.S. third-party claims service provider (according to Business Insurance, bases on 2014 gross revenue), its diverse customer base, product line and geographic spread in the US, and its strong historical organic revenue growth. As a service provider to US corporations, insurance companies and self-insured entities, Sedgwick benefits from stable earning based on long-term contracts with clients, relatively high switching costs faced by clients, a stable cost structure, and the lack of exposure to insurance underwriting risk. These strengths are offset by the company’s substantial financial leverage and low interest coverage as well as exposure to errors and omissions claims, a risk inherent in professional services. Moody’s expects that Sedgwick will continue to pursue a combination of organic growth and acquisitions, the latter giving rise to integrations and contingent risks.
Factors that could lead to an upgrade of Sedgwick’s ratings include: (i) debit-to-EBITDA ratio below 6x, (ii)(EBITDA – capex) coverage of interest exceeding 2x, and (iii) free-cash-flow-to-debt ratio exceeding 4%.
Factors that could lead to a downgrade include: (i) debt-to-EBITDA ratio exceeding 7.5x, (ii) EBITDA-capex) coverage of interest below 1.2x, or (iii) free-cash-flow-to-debt ratio below 2%.
Moody’s has assigned the following ratings to Sedgwick Claims Management Services, Inc.
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Corporate family rating B3
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Probability of default rating B3-PD
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The following debt ratings and loss given default (“LGD”) assessments at Sedgwick Claims Management Services, Inc. were not affected:
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$125 million first-lien revolving credit facility at B1 (LGD2)
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$1,069 million (amount outstanding) first-lien term loan at B1 (LGD2);
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$635 million second-lien term loan at Caa2 (LGD2);
Moody’s has withdrawn the following ratings of Sedgwick Inc. (Old):
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Corporate family rating B3;
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Probability of default rating B3-PD
The principal methodology used in this rating was Insurance Brokers and Service Companies published in December 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology. Please refer to the Moody’s Investors Service’s Policy for Withdrawal of Credit Ratings, available on its website, www.moody.com.
From News Release of Moody’s Investors Service
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