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S&P rates Dell notes BBB-
S&P said it assigned a BBB- rating and 2 recovery rating to Dell International LLC's proposed $4 billion senior secured notes in three tranches.
The 2 recovery rating indicates 70% to 90% expected default recovery.
EMC Corp. is co-borrower, S&P noted.
Dell International and EMC are wholly-owned subsidiaries of Dell Technologies Inc.
The proceeds will be used to repay its $3.75 billion 3.48% first-lien notes due June 2019. Any remaining proceeds will be used to repay outstanding amounts under its $2.02 billion term loan A-5 facility, which matures in February 2019, S&P said.
The term loan A-5 facility, along with its $1.65 billion term loan A-4 and $1.35 billion incremental margin loan facility, were issued in December 2018 to partially fund the $14 billion cash consideration payable to holders of Class V common stock as part of the tracking stock to Class C common stock conversion, the agency explained.
The remaining $9 billion was funded by a special dividend by VMware to Dell, S&P added.
Concurrent with the proposed senior secured notes issuance, Dell also intends to refinance its term loan A-2 and roll over its existing loan into a new five-year senior secured term loan A-6 and accept additional commitments under the new term loan A-6 facility.
Dell also intends to upsize its existing $3.35 billion margin loan facility by $650 million, bringing the total to $4 billion, S&P said.
The BB+ issuer credit rating on Dell Technologies Inc. is unchanged.
The negative outlook reflects a view that pro forma leverage is high at about 4.4x as of year-end 2019, the agency said.
Dell expressed that it remains on track to pay down about $4.8 billion of debt in fiscal 2020 with free operating cash flow and cash on hand, S&P said.
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