Ranking Motion: Moody’s affirms Skillsoft’s B2 CFR and first lien debt ranking; outlook modified to positiveGlobal Credit score Analysis – 17 Mar 2022New York, March 17, 2022 — Moody’s Traders Service (“Moody’s”) affirms Skillsoft Finance II, Inc. (“Skillsoft”) B2 company household ranking (CFR), B2-PD likelihood of default ranking, and the B2 ranking on the corporate’s senior secured time period mortgage. The speculative grade liquidity ranking of SGL-2 is unchanged. Concurrently, Moody’s assigned a B2 ranking to the corporate’s proposed $160 million incremental first lien senior secured time period mortgage. The ranking outlook is modified to optimistic from steady.Proceeds from the proposed incremental time period mortgage alongside roughly $217 of Skillsoft inventory and $60 million of stability sheet money will likely be used to fund the acquisition of Codecademy, a prosumer supplier of technical e-learning.The change of outlook to optimistic displays the latest enchancment in efficiency and Moody’s expectations for strong natural income progress and improved profitability. Regardless of the modest improve in leverage because of the acquisition, Moody’s count on leverage to development in the direction of 4.5x and free money move to gross debt to develop to above 10% over the following 12-18 months as restructuring and one time fees wind down.RATINGS RATIONALEThe B2 CFR displays Skillsoft’s comparatively excessive professional forma debt to EBITDA at closing of the acquisition (over 5x primarily based on trailing October 31, 2021 outcomes excluding sure one-time bills and over 8x together with these bills). Skillsoft’s credit score profile advantages from the corporate’s main place within the e- studying trade, a rising base of pretty predictable revenues from contracts, the rising adoption of Percipio, Skillsoft’s proprietary content material supply platform and a extremely diversified buyer base consisting of enterprise and small to medium sized enterprise.Skillsoft’s credit score profile additionally displays the extremely aggressive, fragmented nature of the human capital administration (HCM) and enterprise e-learning markets, which has low obstacles to entry and a big number of free content material. The ranking additionally considers the execution danger related to the mixing of a number of latest acquisitions, in addition to ongoing enterprise turnaround efforts after years of income declines. Whereas Moody’s expects the corporate will deal with de-leveraging, the corporate is acquisitive which might delay de-leveraging efforts.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSSkillsoft’s rankings may very well be upgraded if the corporate maintains natural income progress and leverage is sustained beneath 4.5x.Skillsoft’s rankings may very well be downgraded if efficiency deteriorates or if free money move technology declines such that liquidity is materially weakened. Rankings might additionally face downward stress if leverage had been anticipated to be sustained over 6x on aside from a short lived foundation.Skillsoft’s SGL-2 ranking is supported by money of $81 million as of October 31, 2021 and expectations for wholesome free money move technology over the following 12 months. The corporate’s unrated $75 million accounts receivable line is predicted to be totally drawn at closing (roughly $11 million drawn as of October 31, 2021).Skillsoft’s final mother or father is a public firm with a semi-independent board of administrators. Moody’s expects the corporate to take care of reasonable monetary insurance policies balancing the pursuits of shareholders and collectors, as demonstrated by the Codecademy acquisition which was funded with a mix of debt, money readily available and fairness.As a software program firm, Skillsoft’s publicity to environmental danger is taken into account low. Social dangers are thought-about low to reasonable, consistent with the software program sector. Broadly, the primary credit score dangers stemming from social points are linked to knowledge safety, variety within the workforce and entry to extremely expert employees.The next rankings had been affected:Affirmations:..Issuer: Skillsoft Finance II, Inc….. Company Household Ranking, Affirmed B2…. Chance of Default Ranking, Affirmed B2-PD….Gtd Senior Secured 1st Lien Time period Mortgage, Affirmed B2 (LGD4) from (LGD3)Assignments:..Issuer: Skillsoft Finance II, Inc…..Incremental Gtd Senior Secured 1st Lien Time period Mortgage B, Assigned B2 (LGD4)Outlook Actions:..Issuer: Skillsoft Finance II, Inc…..Outlook, Modified To Optimistic From StableSkillsoft Finance II, Inc. is the debt issuing subsidiary of Skillsoft Corp. which supplies cloud-based e-learning, in individual coaching, studying administration and human capital administration software program options for enterprises, authorities, and training clients by means of its Skillsoft, SumTotal and World Information companies. The corporate generated an estimated $698 million of professional forma income within the fiscal yr ended January 2022. Skillsoft is headquartered in Nashua, New Hampshire.The principal methodology utilized in these rankings was Software program Business revealed in August 2018 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1130740. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a replica of this system.REGULATORY DISCLOSURESFor additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure type. 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Additional info on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is obtainable on www.moodys.com.The World Scale Credit score Ranking on this Credit score Ranking Announcement was issued by one in every of Moody’s associates exterior the UK and is endorsed by Moody’s Traders Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA below the legislation relevant to credit standing companies within the UK. Additional info on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is obtainable on www.moodys.com.Please see www.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.Please see the rankings tab on the issuer/entity web page on www.moodys.com for extra regulatory disclosures for every credit standing. Matthew B. 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