MediMedia USA, Inc. -- Moody's changes MediMedia's outlook to negative from stable

New York, August 31, 2012 -- Moody's Investors Service (Moody's) changed MediMedia USA, Inc's (MediMedia) outlook to negative from stable. All other ratings, including its Corporate Family Rating (CFR) were affirmed. The reason for the change in outlook is the decline in liquidity since the company amended and extended its first lien bank loan facility and the continuing poor performance of its operations driven by weakness at its Pharmaceutical Marketing business. Its modest cash position and potential lack of revolver availability post the maturity of its non extended revolver leaves the company with a weak liquidity position to meet unanticipated needs or invest into the business.

A summary of today's actions follows.

MediMedia USA, Inc

....Corporate Family Rating, Affirmed at Caa1

....Probability of Default Rating, Affirmed at Caa1

....Senior Secured Bank Credit Facility

-15.3 million Tranche A-1 Revolving Loan maturing October 2012, Affirmed at B2 (LGD2-24%)

-29.7 million Tranche A-2 Revolving Loan maturing August 2014, Affirmed at B2 (LGD2-24%)

-0.7 million Tranche B-1 Term Loan maturing October 2013, Affirmed at B2 (LGD2-24%)

-115 million Tranche B-2 Term Loan maturing August 2014, Affirmed at B2 (LGD2-24%)

....Senior Subordinated Notes maturing November 2014, Affirmed at Caa2 (LGD changed to LGD-5, 78% from LGD-5, 79%)

....Outlook, Negative from Stable

SUMMARY RATING RATIONALE

MediMedia's Caa1 Corporate Family Rating (CFR) reflects its weak liquidity position, its high leverage (7.0x as of June 30, 2012 including Moody's standard adjustments for lease expenses), and negative free cash flow. Also reflected in the rating, is the lack of success that the company has had turning around overall results driven primarily by weakness at its Pharmaceutical Marketing business since amending its credit facilities and extending the maturity dates post the sale of its Animal Health division. Its MediMedia Health division that performs marketing services for pharmaceutical companies has continued to struggle and we do not foresee an improvement in the near term. During the second half of 2012, we expect the company to face tight liquidity conditions as part of its revolver matures in Q4 2012 and its anticipated to have negligible availability on its extended revolver with a limited cushion of compliance with its covenants. The sale of its Animal Health and formulary database business in 2011 and the decline in its pharmaceutical business that was once one of its largest divisions leave the company smaller and less diversified than it had been previously.

Although a small part of overall EBITDA, the company's StayWell Health division has experienced some success turning around its operations after the LifeMaster acquisition which dramatically increased costs without generating a comparable amount of revenues. Its Krames StayWell business also provides support for the rating and is its largest business, although we expect EBITDA to be modestly lower for the FY 2012.

MediMedia's liquidity position is weak given the limited revolver availability post the October 5th 2012 maturity of its non extended revolver, the $7 million cash balance, negative expected free cash flow, and a limited cushion of compliance with its financial covenants. While the Animal Health transaction that closed in August 2011 improved their liquidity, it has deteriorated since then. We expect management to attempt to raise additional sources of liquidity in the near term. The company's Senior Leverage Ratio steps down to 3.5x in Q3 2012 from 3.75x currently which provides the company with a limited cushion of compliance. While the company may pass the leverage test in the near term, aided by the roll off of a weak second quarter 2011 from LTM results, the senior leverage test steps down again to 3.25x at the end of Q1 2013 and to 3x at the end of Q3 2013. MediMedia is also subject to a 1.5x Interest Coverage Ratio for the life of the loan and a $20 million limit on capital expenditures. The continued step downs in its Senior Leverage covenant levels and the slow pace of turning around its operating performance may leave the company at risk of violating its covenant levels. Given limited liquidity, first lien lenders may be reluctant to seek higher interest rates if a covenant is violated, but may seek additional asset sales to further reduce their loan exposure or may increase pressure for additional liquidity from its equity sponsor.

The negative rating outlook is driven by the weak liquidity position, lack of success improving operations, tight covenant levels and approaching maturities of its credit facility and subordinate notes in 2014. We expect EBITDA performance to grow modestly from current levels but it's unclear if it will be able to boost liquidity to an adequate level and if the rate of improvement will be strong enough to allow for a refinancing of its debt structure. The ability to shut down the underperforming MediMedia Health division that generates negative EBITDA currently could provide support for overall EBITDA levels if it does not improve in the near term. The limited capex spending due to poor liquidity may hinder the pace of a turnaround for the company. The leverage level is at the high end of the range appropriate for the rating level and positions the company at the low end of the current Caa1 CFR.

A change in the outlook to stable could occur if the company improves its operating performance, generates positive free cash flow over 5% of debt with adequate liquidity, reduces leverage below 6.5x on a sustained basis and the company becomes well positioned to refinance its debt structure.

Moody's would downgrade the rating if the company's leverage fails to improve below 6.5x on a sustained basis in the near term, its free cash flow or revolver availability failed to improve, its ability to meet debt obligations came into question, or the headroom under its covenants failed to improve from current levels. Any of which would increase the probability of default for the company.

Moody's Loss Given Default methodology (LGD) implies a B1 facility rating for the senior secured credit facilities. However, given the current negative outlook and the potential for additional senior obligations to provide added liquidity that would impact the LGD methodology, the LGD was overridden and the senior secured credit facility rating remained at B2.

The principal methodology used in rating MediMedia was the Global Publishing Industry Methodology published in December 2011. 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.

Headquartered in Yardley, Pennsylvania, MediMedia USA, Inc. (MediMedia) provides health information and services that inform consumers, physicians, and other healthcare decision makers. Its annual revenue is approximately $281 million as of June 30, 2012. The company is primarily owned by Vestar Capital Partners.

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Scott Van den Bosch Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653John Diaz MD - Corporate Finance 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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