Fitch Rates Volt Information Sciences Unsecured Credit Facility 'BB'

Business Wire,  March 13, 2008  

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CHICAGO -- Fitch Ratings has assigned a 'BB' rating to Volt Information Sciences, Inc. (Volt) (NYSE: VOL) $42 million, five-year senior unsecured revolving credit facility. In addition, Fitch affirmed the following:

Volt

--Issuer Default Rating (IDR) Volt at 'BB'

--Secured 8.2% $12.7 million term loan at 'BBB-'.

Volt Delta Resources, Inc. (Volt Delta)

--IDR at 'BB';

--$100 million senior secured facility at 'BBB-'.

The Rating Outlook for all ratings is Stable.

Finally, Fitch has withdrawn the 'BBB-' rating assigned to Volt's previous $40 million senior secured revolving credit facility due April 2008 as the facility was terminated on Feb. 28, 2008 and replaced by the new unsecured facility. The terminated facility was rated 'BBB-' owing to its secured position in the capital structure.

Volt's ratings reflect its ability to maintain solid coverage and leverage metrics and relatively stable operating performance in recent years, while continuing to diversify its sources of operating income away from the staffing services segment, largely through acquisitions in the computer systems area. Volt's operating EBITDA margins, which were in the 3.2% to 4% range from 2004 to 2006, further improved to 4.5% in 2007. Leverage, as measured by total adjusted debt to EBITDAR, was 3.4 times (x) for 2007, owing to the debt used to finance the acquisition of LSSi Corp. (LSSi) in late 2007. Total adjusted debt includes borrowings on the company's accounts receivable securitization program, which is its primary source of funding, as well as rents capitalized at 8x. At year-end 2007 and on Jan. 27, 2008, the company had $120 million and $100 million, respectively, outstanding on the accounts receivable securitization program.

Credit concerns reflect competition in the staffing services segment, the exposure of this segment to the business cycle, and the relatively low margins in the segment. Fitch notes that even in periods of material declines in staffing business revenue, the company is able to maintain a modest level of operating profitability at the bottom of the cycle through the management of its costs. Volt is also able to maintain adequate liquidity during downturns in the business cycle as its accounts receivable liquidate. Its revenue concentration with certain clients, coupled with the short-term nature of most contracts, is a concern which is mitigated by the long-term relationship with key clients and high-quality nature of these customers. Fitch expects the company to continue to invest in the non-staffing areas, and to maintain conservative financial policies.

In September 2007, Volt completed the acquisition of LSSi for approximately $70 million. LSSi's operations are complementary to the existing Volt Delta business as it develops and markets national databases of telephone listings, primarily to enterprise customers, whereas Volt primarily provides a range of directory and information solutions services to a variety of telecommunications operators.

Liquidity is provided by unrestricted cash balances of $44 million as of Jan. 27, 2008, and the company's $200 million accounts receivable securitization program that expires in April 2009. The securitization program had $100 million outstanding as of Jan. 27, 2008. Additional liquidity is provided by Volt's new, senior unsecured $42 million revolving facility which expires in February 2013 and Volt Delta's $100 million secured facility due December 2009. As of Jan. 27, 2008, there was $79.5 million outstanding on the Volt Delta facility. The Volt revolving credit facility requires the maintenance of certain accounts receivable in excess of borrowings and is guaranteed by eight subsidiaries of the company. The main financial covenants include a minimum interest coverage ratio of 4x and a maximum debt to EBITDA ratio of 3x.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of the site.

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