Open Solutions, Inc. -- Moody's downgrades Open Solutions' CFR to Caa2; outlook negative

New York, November 30, 2012 -- Moody's Investors Service downgraded Open Solutions Inc.'s ("Open Solutions") corporate family and probability of default ratings to Caa2 from B3, its senior secured credit facilities to B3 from B1, and the rating for its senior subordinated notes to Caa3 from Caa2. The downgrade reflects Open Solutions' weak operating performance and its approaching debt maturities. Moody's maintained a negative ratings outlook to reflect the potential for further deterioration in Open Solutions' credit metrics due to its limited financial flexibility and a highly competitive market.

RATINGS RATIONALE

Moody's downgraded Open Solutions' debt ratings to reflect a growing mismatch between Open Solutions' earnings and debt levels. The downgrade also reflects Open Solutions' weak revenue growth prospects and elevated risk of default and impairment across the capital structure if the company is unable to address its debt maturities. While the company is pursuing recapitalization alternatives, the risks are exacerbated by the uncertainty, which is hurting the sales of its DNA core processing platform. Moody's Analyst Raj Joshi said, "Absent the infusion of new equity or a purchase by a strategic buyer in the near future, the potential for credit losses is high, especially for the unsecured and subordinated bondholders."

The Caa2 corporate family rating reflects Open Solutions' very high debt leverage (approximately 9.9x total debt-to-EBITDA, Moody's adjusted), limited financial flexibility and expectations for further deterioration in free cash flow. Open Solutions' free cash flow deficit widened in the YTD 3Q 2012 period compared to the same period a year ago. The Caa2 rating also considers Open Solutions' small scale and limited product offerings relative to its larger, better capitalized, and more diversified competitors, who are benefiting from Open Solutions' balance sheet challenges. Open Solutions' very high financial risk profile eclipses the benefits from the company's high levels of recurring revenue, its reported good retention trends for its DNA processing platform, low customer revenue concentration, and although declining, a good backlog of recurring revenues.

The negative outlook considers Open Solutions' weak liquidity, including approaching debt maturities (nearest funded debt maturity is in January 2014), and potential for further deterioration in operating cash flow due to its limited financial flexibility and a highly competitive market.

Moody's could downgrade Open Solutions' rating if liquidity continues to weaken further and if the company is unable to extend its debt maturities by the maturity date.

Moody's could upgrade Open Solutions' ratings if the company successfully recapitalizes the business in line with its earnings. Moody's could stabilize Open Solutions' ratings outlook and upgrade its ratings if the company reduces debt leverage to below 7.0x and if Moody's believes that Open Solutions can maintain sustainable revenue growth and produce free cash flow.

Moody's has taken the following ratings actions:

.Issuer: Open Solutions, Inc.

Corporate Family Rating -- Downgraded to Caa2, from B3

Probability of Default Rating -- Downgraded to Caa2, from B3

....$30 million senior secured revolving credit facility due January 2013-- Downgraded to B3, LGD2 (27%), from B1 LGD2 (27%),

....$539 million outstanding senior secured term loan facility due January 2014 -- Downgraded to B3, LGD2 (27%), from B1 LGD2 (27%),

....$325 million of 9.75% senior subordinated notes due February 2015 -- Downgraded to Caa3, LGD5 (86%), from Caa2 LGD5 (86%),

Outlook action

.Outlook: Negative

The principal methodology used in rating Open Solutions Inc was the Global Software Industry Methodology published in October 2012. 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 Glastonbury, Connecticut, Open Solutions Inc. is a provider of data processing and information management software and services to banks, thrifts and credit unions. The company is owned by funds affiliated to The Carlyle Group and Providence Equity Partners.

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Raj Joshi Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Alexandra S. Parker 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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