New York, November 28, 2012 -- Moody's Investors Service upgraded Sirius Computer Solutions, Inc. ("Sirius Computer") proposed $20 million Senior Secured Revolving Credit Facility and $260 Million Senior Secured Term Loan to Ba3 from B1, the proceeds of which will be used primarily to repay existing debt and to partially redeem outstanding preferred shares of SCS Holdings. The rating action reflects the smaller than previously contemplated senior secured refinancing. In addition the roughly $90 million of preferred stock that will remain on the balance sheet following the refinancing, which Moody's treats as 100% debt, provides junior capital to the senior secured credit facilities. Moody's notes that if the company raises additional senior secured debt to redeem the remaining preferred stock, the ratings on the senior secured debt will be under downward pressure. Moody's also affirmed the B1 corporate family and probability of default ratings ("CFR" and "PDR", respectively) . The rating outlook is stable. The assigned ratings are subject to review of final documentation and no material change in the terms and conditions of the transaction as advised to Moody's.

Summary of Rating Actions:

$20 Million Senior Secured Revolving Credit Facility -- Upgraded to Ba3 (LGD 3 -- 33%) from B1 (LGD 3 -- 42%)

$260 Million Senior Secured Term Loan -- Upgraded to Ba3 (LGD 3 -- 33%) from B1 (LGD 3 -- 42%)

RATINGS RATIONALE

The B1 CFR reflects Sirius Computer's moderately high financial leverage with debt to EBITDA at about 3.3 times (Moody's adjusted, pro-forma for the proposed financing), smaller scale compared to competing technology value-added resellers and managed services firms, and reliance on acquisitions to drive revenue growth. The rating is also tempered by its high vendor concentration, although Moody's recognizes that Sirius Computer is the largest IBM value-added-reseller of IT solutions. The company has also made progress to diversify its vendor base to include products from Cisco, Dell, HP and NetApp. The rating is also supported by the company's track record in generating consistent positive free cash flow and its good track record of paying down debt, even throughout the economic recession.

Moody's expects Sirius to maintain a good liquidity profile over the next four quarters, supported by at least $20 million of cash and anticipated annual free cash flow generation of $30 million or more. The strong free cash flow is buttressed by low capital expenditures, with annual capital expenditures at less than 2% of revenues. Working capital needs are expected to be modest and consistent with seasonality trends.

The stable outlook reflects Moody's expectation that Sirius Computer will maintain its leading market position as a value-added reseller of IT products and services to the mid-tier market in the US, and produce consistent levels of operating profits and cash flows to enable it to delever.

The rating could be upgraded if the company diversifies its vendor base, maintains revenue and cash flow growth and improves its credit metrics, such as adjusted debt to EBITDA falls below 3.0 times on a sustained basis, and EBITDA to Interest coverage rises above 4.0 times. The rating could be downgraded if a significant decline in revenue or cash flows lead to adjusted debt to EBITDA rising in excess of 5.0 times or with the expectation of weakened liquidity which could arise from changed payment terms to its vendors, operating losses, dividend payments, or cash acquisitions without a proportionate increase in EBITDA. A deteriorating relationship with key supplier -- IBM, or failure to further diversify its vendor base, could also place downward pressure on the rating.

The principal methodology used in this rating was Moody's Global Business and Consumer Service Industry rating methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Gerald Granovsky Senior Vice President Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Robert Jankowitz Associate Managing Director Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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