NCR's (NCR) Corp. Rating Affirmed by S&P Amid Blackstone (BX) Deal

Standard & Poor's Ratings Services today said it affirmed its 'BB+' corporate credit rating on NCR Corp. (NYSE: NCR). The outlook is negative.

We also affirmed our 'BBB' issue-level rating on NCR's first-lien secured credit facility, consisting of an $850 million revolving credit facility and $1.35 billion term loan. The recovery rating remains '1', indicating our expectation for very high (90%-100%) recovery in the event of a payment default.

In addition, we affirmed our 'BB' issue-level ratings on the company's senior unsecured notes. We are revising the recovery band of the '5' recovery rating, which reflects our expectation for "modest" recovery in the event of a payment default, to the upper from the lower half of the 10% to 30% range.

"Our affirmation of the 'BB+' corporate credit rating and our negative outlook reflect the company's pro forma leverage for the Blackstone investment of about 4.3x (based on our calculation of debt and EBITDA as of Sept. 30, 2015 and debt adjusted for Blackstone's $820 million investment), and our expectation that it will decline below 4x in 2016," said Standard & Poor's credit analyst Peter Bourdon.

We expect the company's solid free cash flow of about $300 million to $400 million annually will provide it the flexibility to lower leverage. However, we expect inconsistent ATM and POS industry spending over the coming 12 months will challenge NCR's ability to manage business investment and debt reduction. Per our criteria, we treat Blackstone's $820 million investment as debt due to the holder's cash put rights beginning in 2024.

The negative outlook reflects the company's pro forma leverage above 4x and the risks of operational underperformance or other capital deployment decisions that may detract from deleveraging in 2016.

We could lower the rating if the company undertakes debt-financed acquisitions, makes further returns to shareholders, or its earnings weaken such that leverage is sustained above 4x in 2016.

We could revise the rating to stable if the company reduces leverage below 4x on a sustained basis.

You May Also Be Interested In

• Midday movers: Travelers, JB Hunt fall; United Airlines rises
• Barclays Reiterates Overweight Rating on United Airlines (UAL)
• William Penn Bancorporation (WMPN) Tops Q3 EPS by 1c