S&P: Leidos on negative watch

Standard & Poor's said it placed all of its ratings on Leidos Holdings Inc., including the BBB- corporate credit rating, on CreditWatch with negative implications.

“The CreditWatch placement reflects the significant amount of debt that Leidos will incur to fund special payments to its shareholders in conjunction with its planned merger with Lockheed Martin's government IT services business (known as Information Systems & Global Solutions) through a Reverse Morris Trust transaction,” said S&P credit analyst Chris Mooney in a news release.

Lockheed will receive a special $1.8 billion payment at close while Leidos' existing shareholders will receive a special $1.03 billion payment. These payments will be funded with $2.5 billion in incremental debt and cash on hand.

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