Aptean Parent Gator Holdco (UK) Ltd. Assigned 'B-' Issuer Credit Rating, Stable Outlook


  • On Feb. 17, 2019, TA Associates and Vista Equity Partners agreed to acquire enterprise resource planning (ERP) software and solutions company Aptean Inc. and Yaletown Acquiror S.à r.l. The two financial sponsors will each own roughly 50% of the new company, with new audited entity named Gator Holdco (UK) Ltd., the parent of both entities.
  • The transaction will be funded with a new credit facility and new cash equity from the financial sponsors.
  • We are assigning a 'B-' issuer credit rating to Gator Holdco.
  • At the same time, we are assigning a 'B-' issue-level rating and '3' recovery rating to the first-lien term loan, delayed-draw term loan, and revolving credit facility. We are also assigning a 'CCC' issue-level rating and '6' recovery rating to the second-lien term loan.
  • The stable outlook reflects our expectation that Gator Holdco can deleverage with good EBITDA margins and generate consistent free operating cash flow (FOCF) with the continued transition into software as a service (SaaS) product offerings.
NEW YORK (S&P Global Ratings) March 13, 2019—S&P Global Ratings today took the 
rating actions listed above. Our rating on Gator Holdco reflects the company's 
high starting leverage in the high-7x area, narrow market focus, small 
operating scale, and operations in an intensely fragmented and competitive 
market. We believe declines in some legacy products will limit growth 
prospects. Our expectation is that Aptean will continue to be acquisitive in 
pursuit of inorganic growth. However, we believe that Aptean's good EBITDA 
margins and strong net retention rates will continue to sustain stable 
operating performance. The stable outlook reflects our expectation that Aptean 
will deliver good EBITDA margins and consistent FOCF as the move toward SaaS 
offerings continues, and that the rating provides capacity to accommodate the 
company's acquisitive growth strategy.

The stable outlook reflects S&P Global Ratings' expectation that Aptean will 
increase revenue, sustain strong retention rates, and deliver positive free 
cash flow over the next 12 months.

Although unlikely over the next 12 months, we could downgrade Aptean if we 
view its capital structure as unsustainable. This could occur if Aptean has 
weakened liquidity or break-even FOCF due to a failure in mergers and 
acquisition (M&A) strategy that disrupts business operations, improved 
offerings from competition that drive away customers, or large debt-financed 
acquisitions or shareholder returns.

We could raise the rating on Aptean if the company achieves leverage below 7x 
and FOCF to debt above 5% with commitments to stay at these levels through 
acquisitions and shareholder returns. Aptean could achieve this through 
additional margin expansion, new customer wins, effective cross-selling of 
products, and international expansion.
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