Moody's may downgrade Thomson Reuters

Moody's Investors Service said it placed Thomson Reuters Corp.'s Baa2 senior unsecured and prime-2 commercial-paper ratings on review for downgrade following news that it will sell a 55% stake in its financial and risk division, to the Blackstone Group via a private equity transaction.

The deal values the unit at about $20 billion, Moody's said.

The agency said it expects any potential downgrade of Thomson Reuters' senior unsecured rating will be limited to one notch.

Thomson Reuters will receive gross cash proceeds of roughly $17 billion for the majority stake sale and retain a 45% minority equity interest in the division, valued at $3 billion, Moody's explained.

Blackstone plans to raise $14 billion of new debt and preferred equity and contribute $3 billion of cash equity to fund the purchase, Moody's said.

Thomson Reuters intends to use the proceeds to prepay about $3 billion of debt, pay about $1.5 billion to $2.5 billion in taxes and pay transaction expenses.

They will also deploy $1 billion to $3 billion of cash to the balance sheet that would subsequently be used for organic growth investments or acquisitions and repurchase about $9 billion to $11 billion of Thomson Reuters' common shares via a tender offer, Moody's said.

The agency said it review will focus on Thomson Reuters' organic revenue growth profile, business focus, smaller scale, geographic exposure and capital allocation strategy after the disposition.

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