S&P: Micro Focus loans BB-

Standard & Poor’s said it assigned a preliminary BB- long-term corporate credit rating to Micro Focus International plc.

The outlook is stable.

S&P also said it assigned a preliminary BB- rating to the company’s proposed $2 billion senior secured term loans, including an undrawn revolving credit facility.

The recovery rating is 3, indicating 50% to 70% expected default recovery. The assignment follows news that Micro Focus plans to merge with Attachmate Corp.

The proposed senior secured term loans and revolver will be part of the transaction, S&P said.

The preliminary rating reflects the company’s fair business risk profile and significant financial risk profile, the agency said.

The ratings are constrained by the combined group’s narrow revenue base, limited growth prospects and severe competition from much larger players, S&P said.

These weaknesses are partly offset by the group’s solid profitability, the agency said.

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