S&P rates Open Text notes BB

Standard & Poor’s said it assigned a BB rating and 5 recovery rating to Open Text Corp.’s proposed $600 million senior unsecured notes due 2025.

The notes will be issued by Open Text and guaranteed by the borrowers and guarantors of the company’s credit facilities.

The 5 recovery rating indicates 10% to 30% expected default recovery.

The company has leeway to increase the notes offering to about $750 million without affecting the recovery or issue-level ratings on the notes, the agency said.

The proceeds will be used to repay the company’s existing term loan A and for general corporate purposes, including potential acquisitions, S&P said.

The ratings on the first-lien secured debt, which includes the company’s recently upsized revolver to $300 million from $100 million and its term loan B, is unchanged at BBB with a 1 recovery rating.

The transaction will have only a modest impact on the company’s adjusted debt-to-EBITDA ratio at the close of the transaction, the agency said.

The company also has a BB+ long-term corporate credit rating and stable outlook.

The ratings reflect Open Text’s fair business risk profile and intermediate financial risk profile, S&P said.

The ratings also consider the company’s solid market position as a leading provider of enterprise content management and enterprise information management solutions, S&P said.

These strengths are partly offset by the company’s modest scale and limited business breadth, as well as the intensely competitive operating environment in which it operates, the agency added.

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