Fitch lifts SunGard outlook

Fitch Ratings said it revised SunGard Data Systems Inc.'s outlook to positive from stable and affirmed its issuer default rating at B, senior secured credit facility at BB-/RR2, senior notes at B/RR4, senior unsecured notes at B-/RR5 and senior subordinated notes at CCC/RR6.

The agency said the improved outlook reflects its expectation that SunGard will use the roughly $1.25 billion of net proceeds from the pending sale of its higher education business segment to reduce debt. Pro forma for the sale and debt reduction, Fitch estimates that leverage will be reduced to 5.8 times from 6.2 times.

In addition, SunGard continues to pursue a split of its availability services business. Fitch believes that the ultimate plan would result in the remaining SunGard business having leverage near 5 times or below.

The agency said SunGard's ratings are supported by its strong recurring revenue profile, consistent free cash flow, leading positions in each of its businesses and well-diversified customer portfolio.

Fitch's rating concerns include its expectations that SunGard's debt levels will remain significant over the intermediate term, the company's ongoing operating EBITDA margin erosion, its significant exposure to and longer-term uncertainty around the size and structure of the financial services industry and integration risks associated with Fitch's belief that the company will continue its history of acquisitions.

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