Moody’s rates Kyndryl Baa2

Moody's Investors Service said it assigned Kyndryl Holdings, Inc. a Baa2 long term issuer rating.

The outlook is stable.

International Business Machines Corp. (A2, stable) plans to distribute ownership of Kyndryl to its shareholders in a tax free spin before the end of 2021.

Concurrently or before the spin-off, Kyndryl will issue about $2.5 billion in unsecured notes with maturities of not less than five years, issue a $500 million unsecured term loan, obtain a multi-year multibillion dollar unsecured revolving credit facility and assume a share in IBM's pension plans, resulting in Kyndryl's total pension obligation being in an underfunded status of about $1.1 billion, among other things.

Kyndryl will have about $2 billion of cash, around $200 million of capital lease and $1.5 billion of operating lease liabilities immediately after the spin-off is completed.

“An independent Kyndryl will gain greater focus and enhanced operational agility to respond to its existing and potential new customers' IT infrastructure and technology needs, while remaining among IBM's largest customers, providing support to the Baa2 long term rating,” Edmond DeForest, Moody's senior vice president, said in a news release.

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