S&P gives Yahoo convertibles BB+

Standard & Poor's said it assigned its unsolicited BB+ corporate credit rating to Yahoo! Inc.

The outlook is stable.

At the same time, the agency assigned a BB+ issue level rating and a 3 recovery rating to the $1.25 billion convertible notes due 2018. The 3 recovery rating indicates an expectation for meaningful (50% to 70%) recovery of principal for debtholders in a default.

"The corporate credit rating incorporates our assumption of low- to mid-single-digit percent growth in search advertising, stabilization and eventual growth in display advertising starting in 2015, healthy discretionary cash flow, and minimal debt leverage," S&P credit analyst Andy Liu said in a news release.

S&P said it views Yahoo's financial risk profile as "modest." Yahoo's debt leverage is 0x after netting existing excess cash. The $1.25 billion convertible note is the only debt instrument in the capital structure and the company had about $3.2 billion of cash and short- and long-term market securities as of Sept. 30.

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