Moody's drops Affiliated Computer

Moody's Investors Service said it downgraded the senior unsecured debt ratings of Affiliated Computer Services, Inc. to Baa3 from Baa1 and placed the rating on review for further possible downgrade following the company's announcement to repurchase up to $3.5 billion of its stock through a debt financed Dutch tender offer process.

The downgrade reflects the substantial increase in leverage that will result from the proposed transaction, the agency said.

Pro forma for the transaction, unadjusted debt-to-EBITDA will increase to about 4.5 times from less than 1.0 times at Sept. 30, Moody's noted.

Moody's added that the company's ability to execute its strategy of supplementing organic growth with acquisitions may be somewhat limited given the company's increased leverage and reduced free cash flow.

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