Moody's lowers Quad/Graphics view to negative

Moody's Investors Service said it changed Quad/Graphics, Inc.'s outlook to negative from stable following news that the company' has agreed to acquire LSC Communications, Inc. in an all-stock transaction valued at about $1.4 billion, including the refinancing of LSC's debt.

Moody's also said it affirmed Quad's Ba3 corporate family rating, Ba3-PD probability of default rating, Ba2 senior secured credit facility rating and B2 senior unsecured rating.

The company's SGL-1 speculative grade liquidity rating also is unchanged.

The acquisition is strategically appropriate, but changed Quad's ratings outlook to negative because of execution risks related to the company's ability to internalize sufficient scale and operational flexibility benefits, Moody's said.

This is needed to offset credit quality dilution stemming from LSC's relatively higher cost, more highly levered business, the agency explained.

The transaction timetable provides a protracted period in which other events could intervene and disrupt Quad's plans, Moody's noted.

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