Interpublic Group (IPG) Raised to 'BBB-' by S&P; Sees Operating Trends Continuing
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Standard & Poor's Ratings Services today said it raised its corporate credit rating on New York City-based Interpublic Group of Cos. Inc. (NYSE: IPG)(IPG) to 'BBB-' from 'BB+'. The outlook is stable.
Additionally, we raised our issue-level rating on the company's senior unsecured debt to 'BBB-' from 'BB+'. At the same time, we are removing all ratings on the company from CreditWatch, where we placed them with positive implications on Feb. 23, 2015.
"The upgrade reflects our expectation that current operating trends will continue for at least the next two years and that the company will maintain adjusted EBITDA margins above 17.5% in 2015, the midpoint of the 15%-20% range that we consider average for the industry, and adjusted leverage in the low-2x area," said Standard & Poor's credit analyst Naveen Sarma.
The stable outlook reflects our expectation that leverage will remain below the low-2x area.
We could lower the rating if organic revenue growth declines, leading to contracting profitability, negative cash flow, and adjusted leverage rising to the high-2x area. Also, we could lower the rating if the company revises its financial policy, specifically taking on incremental debt to fund return of capital to shareholders.
Although unlikely over the next 12 months, we could raise the rating if the company strengthens its business risk profile while maintaining adjusted leverage below 2x. This could occur if the company expands its operating capabilities while managing its costs and maintaining or improving its margins.
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