Carlyle's Relizon Faces Printing Industry Challenge

The Relizon Co. a Dayton, Ohio-based business communications provider acquired by The Carlyle Group in 2000, is vulnerable to the problems experienced by the North American print sector as a whole, including soft customer demand, overcapacity and competitive pricing pressure, notes Moody's Investors Service.

Moody's has assigned a B1 rating to Relizon's new $294 million credit facility, which comprises a $40 million revolver, $14 million "A" loan and $240 million "B" loan. The revolver and "A" piece mature in 2009, while the "B" tranche is due in 2011. J.P. Morgan and Wachovia Securities are leading the financing. The revolver and "A" loan are priced at LIBOR plus 23/4%. The "B" loan is priced at LIBOR plus 3%, a source familiar with the deal said. Proceeds will be used to refinance existing debt.

Moody's believes the ratings reflect the company's susceptibility to print and direct mail sales, top line erosion, high leverage and relatively poor asset protection metrics. Approximately half of Relizon's document solutions business is represented by traditional printed product sales. Relizon's two largest competitors, Moore-Wallace and Standard Register, are less leveraged and better capitalized, Moody's says.

The ratings are supported by Relizon's specialization within the forms and labels solutions sector and its success in establishing a strong position in the document and billing solutions sector, supplemented by its recently acquired marketing solutions business, Moody's notes.

Standard & Poor's has assigned a BB- rating to the proposed facility, reflecting Relizon's document solutions industry concentration, competitive market conditions in the overall print sector, the mature forms industry and high debt levels. S&P also assigned its recovery rating of three, indicating a 50-80% recovery of principal in the event of a default. Sarah Burton, Relizon's cfo, could not be reached by press time.