S&P turns Open Text view to negative

S&P said it revised its outlook for Open Text Corp. to negative from stable and affirmed its BB issuer and senior unsecured debt ratings. The unsecured rating was placed on CreditWatch with negative implications. Open Text’s BBB- senior secured debt rating is unchanged.

The negative outlook follows Open Text’s agreement to buy Micro Focus International plc for about $6 billion. The acquisition is expected to close in the first quarter of calendar 2023. The company plans to fund the deal through a $2.585 billion term loan, a $2 billion bridge loan, about a $600 million draw on its revolving credit facility, and $1.3 billion in cash.

S&P said it expects Open Text’s leverage to increase to 3.8x above its 3x downgrade threshold.

“Although our forecasts include annual consolidated revenue growth in the low single-digit percentage area and maintenance of EBITDA margins in the mid-30% area, we believe Open Text's ability to deleverage to the company's 3x target in two years depends on the successful execution of integration and synergy generation, which we view as a higher risk given the size and scope of the acquisition,” the agency said in a press release.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.