S&P Places URS Corp. (URS) on CreditWatch Negative

Standard & Poor's Ratings Services said today that it placed its ratings, including the 'BBB-' corporate credit rating, on San Francisco-based engineering and construction company URS Corp. (NYSE: URS) on CreditWatch with negative implications.

The CreditWatch placement follows the company's announcement that it has agreed to be acquired by AECOM Technology Corp. (not rated) in a cash and stock transaction valued at about $6 billion and includes the assumption of URS debt. The deal is subject to regulatory approvals, URS stockholders' approval of the merger agreement, and AECOM stockholders' approval of the issuance of shares in the transaction. URS expects the acquisition to close in October 2014.

"We believe the transaction could weaken the new parent company's, AECOM Technologies Corp.'s, credit protection measures," said Standard & Poor's credit analyst Robyn Shapiro. "We estimate that the two companies' consolidated pro forma adjusted total debt (including operating leases and postretirement benefit obligations) to EBITDA could approach 5x at closing." We expect that all of URS' existing rated debt will be repaid as a result of this transaction.

We will resolve the CreditWatch placement following our review of the financial and business risk impact of the acquisition. We believe that a downgrade is likely, given the anticipated increase in debt leverage for the combined entity, and we expect to resolve the CreditWatch placement when the transaction closes.

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