Globetrotter Intermediate LLC Assigned 'B-' Rating On Planned Buyout Of Quick Base; Outlook Stable; Debt Rated 'B'


  • In January 2019, Vista Equity Partners (Vista) agreed to acquire U.S. provider of commercial software development tools Quick Base. The transaction is expected to be funded by a $275 million first-lien term loan, a $140 million second-lien term loan, and equity from Vista, current sponsor Welsh, Carson, Anderson & Stowe (WCAS), and management.
  • As a result, we expect high gross leverage of about 11x in 2019 based on S&P Global Ratings' adjusted EBITDA. However, we forecast significant deleveraging over the next few years driven by organic revenue growth rates of about 20% and EBITDA margin improvements toward 30% by 2020.
  • We assigned our 'B-' issuer credit ratings to Globetrotter Intermediate LLC, the new holding company for Quick Base, and Quartz Holding Co., the borrowing entity.
  • We also assigned our 'B' issue-level rating and '2' recovery rating to the proposed $275 million first-lien term loan and $40 million revolving credit facility (RCF).
  • The stable outlook reflects our expectation that Quick Base will delever to about 11x in 2019 helped by continued strong market demand for model-driven development tools and an improvement in EBITDA margins above the mid-20% area. We also expect adequate liquidity and free operating cash flow (FOCF) to debt of about 3.5% in 2019 driven by the company's recurring subscription fee model.
NEW YORK (S&P Global Ratings) March 14, 2019—S&P Global Ratings today took the 
rating actions listed above. The rating mainly reflects the elevated leverage 
of about 11x expected in 2019 as a result of the transaction, while balancing 
the company's small revenue base and relatively narrow product focus with its 
good revenue visibility and market tailwinds. Although we forecast 
deleveraging toward the 8x area in 2020, we view these metrics as weaker than 
typical for 'B' rated software companies. We expect leverage reduction in 2020 
to come from EBITDA growth of 35%-40% as a result of strong organic revenue 
growth prospects combined with improvements in EBITDA margins. 

The stable outlook reflects our expectation that Quick Base will rapidly 
delever following the transaction through organic revenue growth of above 20% 
helped by continued strong market demand for model-driven development tools 
and an improvement in EBITDA margins above the mid-20% areas. We also expect 
adequate liquidity and continued positive FOCF generation driven by a 
recurring subscription fee model. We thus expect S&P Global Ratings-adjusted 
leverage of about 11x in 2019 and FOCF to debt of about 3.5% in 2019. 

We could lower the rating if we believe the capital structure is unsustainable 
due to weakening liquidity or tightening covenant headroom. This could come 
from an aggressive financial policy resulting in large debt-funded 
acquisitions or shareholder returns, combined with weaker-than-expected 
revenue growth from greatly increased competition or an unproductive 
go-to-market strategy.

Although we view this as unlikely over the next 12 months given the high 
initial leverage at transaction close, we could raise the rating if Quick Base 
is able to reduce leverage to about 7x while improving FOCF to debt to above 
5% on a sustainable basis. The company could achieve this in the medium term 
if it is able to maintain organic revenue growth of more than 20% while 
improving adjusted EBITDA margins toward the mid-30% area and maintaining FOCF 
above $20 million. 

An upgrade would likely come from sustained strong market growth for 
low-code/no-code application development tools and the company's ability to 
win new customers and capture upsell opportunities within its existing 
customer base from reinforcing its go-to-market strategy. 
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