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Investing.com -- Moody’s Ratings has affirmed LendingTree, Inc.’s B3 Corporate Family Rating while upgrading its Probability of Default Rating to B3-PD from Caa1-PD and changing the outlook to positive from stable.
The credit rating agency also assigned B3 ratings to LendingTree’s planned new Senior Secured First Lien Bank Credit Facilities, which include a 5-year $75 million Revolving Credit Facility and a 5-year $400 million Term Loan. The company’s speculative grade liquidity rating was upgraded to SGL-2 from SGL-3.
Moody’s views LendingTree’s planned refinancing transaction as credit positive. Proceeds from the proposed $400 million Senior Secured First Lien Term Loan will be used to repay all outstanding debt. While the pro forma capital structure will remain largely unchanged, the new credit agreement includes materially looser covenants compared to existing debt obligations.
The positive outlook reflects recent deleveraging and growing confidence in financial projections. Moody’s expects LendingTree’s debt to EBITDA ratio to approach 5x and free cash flow to debt to rise to at least mid-teens percent over the next 12-18 months.
The rating agency projects total revenue to exceed $1 billion, with EBITDA margins expanding to the high single digit percent range and free cash flow averaging near $60 million annually, potentially rising above $70 million.
LendingTree’s credit profile is supported by its strong brand and large network of financial service partners, though it faces challenges from its high leverage, relatively small scale, and exposure to economic conditions, particularly interest rates and lending volumes. Emerging technologies, specifically generative artificial intelligence, represent a potential threat to the company’s lead generation business model.
The company’s liquidity position is good, supported by $126 million in cash at the end of the last quarter (about $45 million pro forma for the refinancing) and an undrawn proposed $75 million revolving credit facility.
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