Moody’s rates TriNet’s new Senior Secured Credit Facilities at B1

Approximately $650 million of debt affected

Moody’s Investors Service (“Moody’s”) rated TriNet HR Corp.’s (“TriNet”) new $650 million Senior Secured Credit Facilities at B1. The B1 Corporate Family Rating and stable outlook are unchanged.

Proceeds will be used to refinance TriNet’s existing Senior Secured Credit Facilities. The new Senior Secured Credit Facilities carry a lower interest rate, which will reduce annual interest expense by about $10 million, a nearly 40% reduction, due to reduced interest margins and the elimination of the LIBOR floor. The existing facilities include a $455 million term loan maturing in 2020, a $120 million term loan maturing in 2016, and a $75 million revolver maturing in 2016. The new facilities include a $400 million term loan maturing in 2019, a $175 million term loan maturing in 2017, and a $75 million revolver maturing in 2019.

Assignments:

..Issuer: TriNet HR Corporation

….Senior Secured Term Loan due 2019, Assigned B1, LGD3 (48%)

….Senior Secured Term Loan due 2017, Assigned B1, LGD3 (48%)

….Senior Secured Revolver due 2019, Assigned B1, LGD3 (48%)

RATINGS RATIONALE

“The refinancing enhances liquidity as it lowers the interest expense and pushes out the maturity of a portion of the debt,” said Terry Dennehy, Senior Analyst at Moody’s.

The B1 corporate family rating (CFR) reflects TriNet’s high leverage given the company’s small scale relative to Professional Employer Organization (“PEO”) industry leader Automatic Data Processing (ADP). Competition is high, given low industry barriers, and customer contracts are quite short (cancellable on 30 days notice). Moreover, there is considerable turnover in the company’s customer base, characteristic of the small and medium sized business segment. Furthermore, TriNet’s products tend to be more customized than those of the larger industry players and thus there is limited ability to scale its business products. As a PEO, the employees of TriNet’s customers become TriNet “co-employees,” exposing TriNet to liability risk from these employees as well as some limited exposure of customers’ ability to cover payroll.

Nevertheless, TriNet does have a record of strong revenue growth and EBITDA margins, with solid free cash flow as a result of the limited capital expenditure requirements, which we expect to generate rapid deleveraging to levels more appropriate for the B1 rating. As a PEO, TriNet offers its customers a compelling value proposition, providing scale in economies in purchasing insurance and in regulatory compliance. Although TriNet has a history of large equity distributions, we believe that as a public company since April, TriNet will now refrain from debt-funded distributions.

The stable outlook reflects our expectation that TriNet will continue to expand its base of worksite employees (“WSEs”), organically growing revenues by at least ten percent over the near term and will maintain an operating margin (Moody’s adjusted) of at least high teens percent. We expect that the growing revenue base will produce expanding EBITDA such that debt to EBITDA (Moody’s adjusted) will be on course to decline to below 4x over the next 12 to 18 months.

The rating could be upgraded if we believe that TriNet is increasing market share as evidenced by organic revenue growth exceeding industry revenue growth. Moreover we would expect annual client attrition to be maintained below twenty percent, indicating that TriNet’s service is differentiated from its key competitors. Furthermore, we would expect absolute debt reduction of at least 10% per year in addition to EBITDA growth such that we believe that the ratio of debt to EBITDA (Moody’s adjusted) will be maintained below 3x.

The rating could be downgraded if we believe that TriNet is losing market share, as evidenced by revenue growth trailing the industry average, or if we believe that client attrition will remain above 20%. Indications of operational difficulties, as evidenced by operating margins declining below the low teens percent, could also pressure the rating. The rating could be lowered if TriNet engages in further shareholder-friendly actions prior to meaningful deleveraging, or if we expect that debt to EBITDA (Moody’s adjusted) will be sustained above 5x.

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

TriNet, based in San Leandro, California, is a professional employer organization (“PEO”), which provides outsourced human resource functions, including payroll, benefits acquisition, and regulatory compliance management to small and mid-sized businesses. TriNet is majority-owned by affiliates of private equity firm General Atlantic LLC.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Terrence Dennehy
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Lenny J. Ajzenman
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653