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S&P upgrades Air Newco
S&P said it raised the ratings on Advanced Computer Software's holding company, Air Newco 5 Sarl's senior secured loans to B from B-.
The upgrade reflects continued solid performance by Advanced, including recurring revenue growth and improvement in reported EBITDA margins to a mid-30s percentage by successfully executing on its cost transformation program, S&P said.
A recently announced acquisition and related combined debt and equity financing should further contribute to reducing Advanced's leverage and improving cash flow generation in financial 2020, the agency said.
Advanced Computer recently made a few bolt-on acquisitions, which will contribute about £10 million of EBITDA after synergies to be created with its existing software and IT solutions, S&P explained.
The acquisition, which will be about 50% funded with equity from Advanced shareholder Vista, reflects transaction leverage of less than 3x, further supporting a forecast of reduction in leverage in financial 2020, the agency said.
These acquisitions, as well as the acquisition of Science Warehouse and Docman in financial 2019, will contribute to Advanced's competitive position as they enhance its capabilities, improve cross-selling opportunities and increased its share of recurring revenues to nearly 70%, up from 64% in financial 2018, S&P said.
The ratings also reflect the company's small scale compared with other established software peers, along with its limited geographic diversity, the agency said. These weaknesses are partly offset by Advanced's solid positions in the niche segments of health care solutions and back-office enterprise resource planning solutions for legal services and advanced learning in the United Kingdom, S&P said.
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