S&P lifts Science Applications

S&P said it raised the issuer credit rating on Science Applications International Corp. (SAIC) to BB+ from BB and removed the rating from CreditWatch.

S&P also said it raised the rating on the company's first-lien credit facility, which consists of a $400 million revolver, $1.068 billion term loan A due 2023 and $1.05 term loan B due 2025, to BB+ from BB. The 3 recovery rating is unchanged.

The outlook is stable.

The upgrades reflect SAIC's recently completed acquisition of Engility on expected terms, S&P said.

SAIC purchased Engility for about $2.5 billion with Engility's shareholders receiving 0.45 shares of SAIC stock for each share of Engility stock held, the agency explained.

SAIC also assumed about $950 million of Engility's debt, which it refinanced with a new term loan. The term loan was part of a new senior secured credit facility that the company entered into in October 2018, consisting of a $400 million revolver due 2023, $1.068 billion term loan A due 2023 and $1.05 billion term loan B due 2025, S&P said.

None of Engility's debt remains outstanding.

Although pro forma debt leverage will rise in fiscal year 2019 due to the acquisition of Engility, the agency said it expects the company's leverage to decline to 3.2x to 3.6x in 2020 because of a full year of earnings and the absence of transaction costs.

The stable outlook reflects SAIC's broader scale and scope after the acquisition, S&P said, and an expectation that company's elevated debt leverage after the acquisition will improve in the near term.

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