Fitch affirms Affiliated Computer Services

Fitch Ratings said it affirmed Affiliated Computer Services, Inc.'s ratings and removed them from Rating Watch negative, including the BB issuer default, senior secured revolving credit facility and senior secured term loan ratings and the BB- senior note rating.

The outlook is negative.

The agency said the removal of the ratings from Rating Watch Negative is based on the company's fulfillment of all financial reporting requirements necessary to maintain covenant compliance with its credit facility agreement following the filing of its 10-K report for the fiscal year ended June 2006 and 10-Q reports for the quarters ended Sept. 30 and Dec. 31.

The previous filing delay was the result of the company's internal investigation into its historical stock option grant practices. The investigation concluded in late November, leading to a non-cash, cumulative, pre-tax restatement for previously unrecognized stock-based compensation expense of $51.2 million and the resignation of the company's chief executive officer and chief financial officer.

The negative outlook reflects the potential continuation of debt-financed share buybacks funded via the company's uncommitted accordion feature under its term loan facility, Fitch said. Additional rating concerns center on Affiliated Computer Services' acquisitive nature and limited organic revenue growth in the government segment.

The ratings are supported by the company' consistent free cash flow, significant recurring revenue base from long-term outsourcing contracts and favorable growth prospects for business process outsourcing, the agency said.

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