Fitch assigns Kyndryl, loans, notes BBB

Fitch Ratings said it assigned first-time BBB long-term issuer default and senior unsecured ratings to Kyndryl Holdings, Inc., its loans and notes. The outlook is stable.

“The ratings and outlook reflect that Kyndryl's conservative financial structure and solid liquidity will support the company as it rebalances its contract portfolio and completes its transition to a stand-alone entity following the November 2021 separation from International Business Machines Corp. The focus on pivoting to higher value services and profitable growth will continue to weigh on revenue, which should be down by mid-single digits on a constant currency organic basis over the next two years,” the agency said in a press release.

Fitch said that, “Adjusted for the non-recurring cash outlays, FCF averages roughly $500 million in fiscal years 2023 and 2024 and should approach $1 billion of annual FCF as early as fiscal 2025, driven by roughly break-even organic revenue growth and profit margin expansion related to a richer sales mix.”

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