Riverdeep debt plan is approved

Riverdeep shareholders have approved a debt restructuring package that will allow the firm's two venture-capital backers to double their investment in the educational software firm within a year.

The restructuring was accepted at a sparsely-attended e.g.m. in Dublin yesterday, with none of Riverdeep's 500 small Irish shareholders expressing any opposition to the package.

These shareholders own about 7 per cent of the firm, but this will rise to 11 per cent when the debt restructuring has been completed.

Mr Tony Mulderry, executive vice president of strategic relations at Riverdeep who chaired the e.g.m., said the firm was "optimistic" a share offering under the refinancing would be oversubscribed. Mr Mulderry said the firm was also anticipating good demand for a $250 million (€204 million) bond due to close at the end of this week.

Moody's said yesterday it was assigning the bond with a (P) B3 rating. The agency said the rating reflected positive factors such as Riverdeep's established market position and its improved cost structure, as well as negatives including its limited track record as an integrated entity and the lack of independence on the company's board.

Standard & Poor's assigned the bond with a B-minus rating, with the move reflecting its subordinated position behind the firm's proposed $75 million senior secured term loan and a $25 million revolving credit facility.

The rating agency has given Riverdeep's senior secured facilities a B-plus rating. This reflects the secured position of bank lenders under the refinancing structure and their expectation of recovering more than 80 per cent of the principal in the event of default or bankruptcy.

"The ratings reflect Riverdeep's highly-leveraged capital structure as well as the potential revenue volatility of its US-focused specialist software businesses," said Standard & Poor's credit analyst, Ms Anna Overton.

Ms Overton went on to point to favourable market conditions in the US for Riverdeep's products and its ability to streamline costs.