May 24 – Standard & Poor’s Ratings Services said today that its rating and
outlook on SafeNet Inc. (rated ‘B’ with a stable outlook) are not affected
following the company’s announcement that it has withdrawn its proposed $175
million dividend recapitalization transaction. SafeNet is a provider of data
protection solutions to commercial and government customers.
Had the recapitalization occurred as planned, leverage would have risen to
the 7x area, which is high for the rating and would have depleted much of
SafeNet’s debt capacity at the ‘B’ rating. With the withdrawal of the $175
million dividend transaction, debt to EBITDA at the end of the first quarter was
in the low-5x area, which provides the company more financial flexibility.
Although weakness in the company’s government and Europe business, combined with
increased investments in the commercial data protection business, caused EBITDA
to decline by approximately 47% in the first quarter, Standard & Poor’s expects
revenue and EBITDA to modestly grow for the remainder of the year. Liquidity
remains adequate, with $44 million on cash (as of March 31, 2012), positive free
cash flow generation, and availability under its $25 million revolving credit
facility.
