S&P Assigns 'B' Rating to TIBCO Software (TIBX); Sees Cost-Saving Opportunities, Adequate Liquidity

Standard & Poor's Ratings Services said today that it assigned its preliminary 'B-' corporate credit rating to Palo Alto, Calif.-based TIBCO Software (NASDAQ: TIBX). The outlook is stable.

At the same time, we assigned our preliminary 'B-' issue-level rating and preliminary '3' recovery rating to the company's proposed $1.65 billion senior secured first-lien term loan due 2020 and $125 million revolving credit facility due 2019. The preliminary '3' recovery rating indicates our expectation for meaningful recovery (50%-70%; at the lower end of the range) in the event of payment default.

We also assigned our preliminary 'CCC' issue-level rating and preliminary '6' recovery rating the company's proposed $950 million senior unsecured notes due 2021. The preliminary '6' recovery rating indicates our expectation for negligible recovery (0%-10%) in the event of payment default.

Balboa Merger Sub Inc. will be the initial borrower of the debt. Once the acquisition is completed, Balboa will merge into TIBCO, and TIBCO will be the borrower going forward. We will finalize our preliminary ratings following a review of the executed closing documents.

The rating on TIBCO reflects our adjusted leverage of almost 11x (pro forma for the proposed transaction, excluding the asset sale bridge facility and cost saving adjustments), the transition risk associated with TIBCO's aggressive cost reduction plan, and the company's recent slowing revenue growth. Partially offsetting these factors are significant cost saving opportunities that could result in adjusted leverage near 8x over the next 12 months--if the company manages transition risk effectively--and its established positions in the IT integration and analytics software markets.

"The stable outlook reflects our view that TIBCO's cost saving opportunities and adequate liquidity are likely to mitigate unplanned business disruption from its cost restructuring activities, such that the company is likely to meet its debt service obligations over the next 12 months," said Standard & Poor's credit analyst Christian Frank.

We could lower the rating if the expected headquarters sale-leaseback transaction is not on track to be completed before the asset sale bridge loan's maturity; if disruption from transition activities causes licenses and professional services sales to decline more than we expect, resulting in negative FOCF on a sustained basis; or if financial covenants restrict access to revolver borrowings such that we view the company's liquidity as less than adequate.

We could raise the rating if the company generates consistent license sales and implements material cost reductions such that it records sustained leverage below 8x.

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