Moody's Initial Report on MicroStrategy Senior Secured Loans | LibreCharts

Moody's Initial Report on MicroStrategy Senior Secured Loans

We'll start with the ratings:

1. Corporate Family Rating = B3

2. Probability of Default Rating = B3-PD

3. Speculative Grade Liquidity Rating = SGL-2

4. Senior Secured Regular Bond/Debenture = Ba3 (LGD1)

Here's the Link to the Moody's Press Release Explaining the Ratings = https://www.moodys.com/research/Moodys-assigns-B3-CFR-to-MicroStrategy-outlook-stable--PR_448144

Starting out the gate, "The B3 CFR reflects MicroStrategy's very high financial leverage, small scale relative to competing data analytics software providers and expectations for modest organic growth in the low single digit percent range. MicroStrategy, which generated revenues of about $492 million in the LTM period ended March 31, 2021, will have Moody's adjusted gross leverage well in excess of 20x (Moody's treats stock-based compensation as an expense) pro forma for the proposed transaction."

Not quite so positive out the gate.

Moody's does go on to note that MicroStrategy was able to acquire the $1.6B+ in additional capital (via convertible notes) with little to no upfront cost to them (i.e., interest rates), which is a big bonus for them (lowers the hell out of their overall potential risk vs. what it could otherwise be).

"The Ba3 rating on MicroStrategy's senior secured notes reflects the company's B3-PD probability of default rating, their senior secured nature and position in the capital structure relative to the outstanding $650 million and $1.05 billion convertible notes due in 2025 and 2027, respectively. The senior secured notes are expected to have a maturity of 7 years with springing maturity 91 days inside the existing 2025 and 2027 convertible notes maturities if MicroStrategy does not have liquidity in a specified amount at such a time."