Moody's might downgrade Open Text

Moody's Investors Service said it placed Open Text Corp.'s Ba1 corporate family rating, Ba2-PD probability of default rating and Ba1 senior secured bank credit facilities under review for downgrade.

The company announced that it will acquire GXS Group, Inc. The $1.2 billion acquisition will be financed with $800 million of debt, equity and cash on hand. GXS's existing debt is expected to be repaid as part of the transaction.

The agency said the review was prompted by the scale of the acquisition. Though Open Text's Ba1 corporate family rating accommodates a certain amount of debt-financed acquisitions, the GXS transaction is larger than originally contemplated in the rating.

The review will focus on the strategic rationale and integration risks of the acquisition as well as the terms of the financing, final capital structure and debt repayment plans.

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