Sign in Subscribe
Banks (Finance)

Moody's Assigns B1 Rating to Priority Holdings' Senior Secured First Lien Bank Credit Facilities

Strategic Insights

— 2 min read

Moody's Investors Service has assigned a B1 rating to Priority Holdings, LLC's proposed Senior Secured First Lien Bank Credit Facilities, consisting of a $1,000 million term loan due 2032 and a $70 million revolving credit facility due 2030. The company's other ratings, including its B1 Corporate Family Rating (CFR) and B1 Senior Secured First Lien Bank Credit Facilities ratings, are unaffected by this transaction.

The stable outlook reflects Moody's expectation of healthy revenue growth in 2025 and 2026, along with modest margin expansion and expanded free cash flow generation. Priority Holdings' credit profile is supported by good cash flow generation relative to debt levels, with free cash flow to debt expected to approximate 8% in FY 2025. The company's goal to continue to deleverage through both earnings growth and debt paydown also supports its credit position.

However, the company's elevated financial leverage of about 4.6x at March 31, 2025, and exposure to the competitive merchant acquiring and payment processing space are notable concerns. Additionally, the strategy includes M&A, which could present integration costs and potentially slow down the deleveraging trajectory.

Key Takeaways:

  • The B1 Corporate Family Rating (CFR) reflects healthy revenue growth in all three segments, with particularly strong growth in the Enterprise business, which largely consists of payment processing services for customers of debt resolution platforms.
  • The credit profile is supported by good cash flow generation relative to debt levels, with free cash flow to debt expected to approximate 8% in FY 2025.
  • The company's goal to continue to deleverage through both earnings growth and debt paydown also supports its credit position.
  • Priority Holdings is exposed to the very competitive merchant acquiring and payment processing space, where price competition and technology innovation can impact company results.
  • The strategy includes M&A, which could present integration costs and potentially slow down the deleveraging trajectory.
  • The company has a concentrated ownership structure with a majority owned by the founder and his family, which could lead to potential debt-funded acquisitions.
  • Priority's very good liquidity is supported by an unrestricted cash balance of $44 million as of March 31, 2025, and projected free cash flow of about $75 million in 2025.
  • The maturity for the $1,000 million term loan will be 2032, while the revolving credit facility is subject to a total net leverage covenant of 6.9x applicable when utilization exceeds 35%, stepping down to 6.4x by June 30, 2026.
  • The ratings could be upgraded with consistent revenue and EBITDA growth, debt-to-EBITDA (Moody's adjusted) sustained below 4x, free-cash-flow-to-debt at or above 10%, and a balanced financial policy.
  • The ratings could be downgraded with revenue or margin declines, debt-to-EBITDA (Moody's-adjusted) sustained above 5x, a deterioration of liquidity and/or cash flow generation, and/or expectation of a more aggressive financial policy.

Statistics:

  • The proposed Senior Secured First Lien Bank Credit Facilities consist of a $1,000 million term loan due 2032 and a $70 million revolving credit facility due 2030.
  • The company's free cash flow to debt is expected to approximate 8% in FY 2025.
  • Priority Holdings' financial leverage is about 4.6x at March 31, 2025.
  • The company has an unrestricted cash balance of $44 million as of March 31, 2025.
  • Projected free cash flow for 2025 is about $75 million.
  • The maturity for the $1,000 million term loan will be 2032.
  • The revolving credit facility is subject to a total net leverage covenant of 6.9x applicable when utilization exceeds 35%, stepping down to 6.4x by June 30, 2026.

Sources:

  • Moody's Ratings, "Priority Holdings, LLC", dated May 27, 2025.
  • Moody's Investor Service, "Business and Consumer Services", published in November 2021, available at https://ratings.moodys.com/rmc-documents/356424.
  • Moody's Investor Service, "Rating Methodologies", available at https://ratings.moodys.com.

Read more