Security-Conscious Era Strengthens Allied Security

Allied Security, a contract security provider, is able to draw strength from its stable operations in a security-conscious environment to support its new $125 million credit facility. "The business is a very stable business. Very few businesses are likely to turn around and cut their security staff," said Paul Aran, senior analyst at Moody's Investors Service. "Corporations are constantly revisiting their security needs," he added, noting that most firms are likely to want more security in these times. Moody's has assigned a B2 rating to the deal, noting that a strong management team, low account turnover and the company's ability to retain employees also support the credit.

Among the concerns for Allied Security are its negligible tangible assets and relatively small free cash flow. The new bank debt will be secured by a first priority interest in all tangible and intangible assets, but due to the nature of its business, tangible assets are slim. Other potential risks also include a possible change in the competitive marketplace as well as litigation risk. Pro forma debt to EBIDTA is expected to be in the area of 4.5 times and pro forma interest coverage measured by EBITDA less capital expenditure clocks in at roughly 2.1 times.

The credit facility is slated to back the $270 million MacAndrews & Forbes Holdings acquisition of Allied Security from an investor group led by Gryphon Investors. The new five-year, $20 million revolver and seven-year, $105 million term loan will be issued by an Allied Security holding company, Spectaguard Acquisition. The acquisition transaction is valued at eight times EBITDA.