Moody's eyes Open Text for downgrade

Moody's Investors Service said it placed Open Text Corp.'s ratings, including its Ba1 corporate family rating and the Baa2 and Ba2 ratings for its senior secured credit facilities and senior unsecured notes, respectively, on review for downgrade following the company’s announcement it plans to acquire Micro Focus International plc in an all-cash transaction for an enterprise value of about $6 billion. The SGL-1 speculative grade liquidity rating is unchanged.

“Moody's placed the credit ratings on review to reflect Open Text's elevated execution risk and its weaker financial profile as a result of the substantial increase in debt to be incurred in connection with the pending acquisition of Micro Focus. Open Text's high financial risk tolerance is a key driver of the rating action,” the agency said in a press release.

Moody’s noted Open Text plans to finance the deal with $4.6 billion of new debt, $600 million of borrowings under its revolving credit facility, and $1.3 billion of cash on hand.

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