Outerwall Inc. -- Moody's says Outerwall Inc.'s capital structure initiatives and discontinuation of certain new venture concepts will not impact credit ratings

New York, December 11, 2013 -- Moody's Investors Service said that Outerwall Inc.'s ("Outerwall") announcement to increase the size of its senior secured credit facility (due 7/15/2016) by $350 million will not impact the company's Ba2 Corporate Family Rating (CFR) or the Ba3 rating on its existing senior unsecured notes. The company exercised the accordion option under its credit facility to increase the size of its term loan by $200 million and provide an additional $150 million of revolver capacity. There are no material changes to the terms and conditions in the credit agreement. Outerwall will likely use the additional liquidity for share repurchases, which amounted to $95 million in the first nine months of 2013. The company expects to buyback an additional $100 million in Q4, bringing total share repurchases to $195 million for the year, which would result in share buybacks exceeding free cash flow generation in 2013. Moody's views the planned share buyback as a credit negative as it will lead to an increase in debt-to-EBITDA leverage and diminish liquidity over the near to intermediate term. However, the announced actions will have no immediate impact on the company's credit ratings as we expect that Outerwall will execute shareholder returns within its publicly stated net debt/EBITDA leverage target of 1.75x to 2.25x, which compares to about 2.0x to 2.5x gross debt to EBITDA incorporating Moody's standard adjustments. Pro-forma leverage (incorporating Moody's standard adjustments) for the revised capital mix was 1.9x at 9/30/2013 versus 1.7x on a reported basis. We do not anticipate debt-to-EBITDA will exceed 2.0x to 2.25x for a sustained period and this is well within the 2.75x maximum debt leverage threshold outlined for the Ba2 rating.

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