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Fitch Maintains Corel's 1st Lien Term Loan Rating at 'BB+'/'RR1'; Outlook Stable.

Chicago: Fitch Ratings maintains the 'BB+'/'RR1' issue rating assigned to Corel Corporation's (Corel) 1st lien term loan following the company's announced $90 million upsize of its existing term loan. The proceeds from the incremental issuance, along with equity contribution from Vector Capital and cash on balance sheet, will be used to fund the acquisition of Parallels, Inc. (Parallels), announced on Nov. 15, 2018. The acquisition is expected to close before the end of 2018. Other than the incremental issuance, no changes are being made to the credit facility. The Rating Outlook is Stable.

With the acquisition of Parallels and planned cost optimization, Fitch estimates Corel's pro forma gross leverage to be 3x, within the sensitivities previously set for the current ratings. Fitch believes there are significant operational synergies to be realized between Corel and Parallels, particularly in areas of G&A and S&M, given the similarities in their product distribution structures. In addition, Parallels' strong market position within the Mac market segment provides Corel with exposure to a segment it previously had limited access to, thereby broadening Corel's distribution potential.


Developments That May, Individually or Collectively, Lead to Positive Rating Action:

--Fitch's expectation for organic revenue growth to sustain in the high single-digits corresponding

to a fundamental shift toward higher growth product portfolio;

--FCF exceeding $200 million;

--Gross leverage sustaining below 2x.

Developments That May, Individually or Collectively, Lead to Negative Rating Action:

--Fitch's expectation for sustained negative organic revenue growth;

--Gross leverage sustaining above 3.5x.


Fitch currently rates Corel as follows:

Corel Corporation

--Long-term Issuer Default Rating 'B+'; Outlook Stable;

--$10 million revolving credit facility (undrawn) 'BB+'/'RR1';

--$360 million 1st lien term loan B 'BB+'/'RR1'.

Corel Inc.

--Long-term Issuer Default Rating 'B+'; Outlook Stable.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Jan 23, 2019
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