S&P Places Lexmark's (LXK) Ratings on CreditWatch Developing

Standard & Poor's Ratings Services said that it placed its 'BBB-' corporate credit rating on Lexmark International Inc. (NYSE: LXK), as well as the 'BBB-' issue-level ratings on the company's unsecured notes, on CreditWatch with developing implications.

"The CreditWatch placement is based on the announcement on April 19, 2016 that Apex Technology and PAG Asia Capital agreed to acquire Lexmark. Apex, a China-based manufacturer and distributor of printers, and PAG, a private equity sponsor, plan to finance the acquisition through a combination of equity contributions and debt financing," said Standard & Poor's credit analyst Peter Bourdon.

We revised our outlook to negative on the company's 'BBB-' corporate credit rating in February 2016 due to the secular decline prospects for the company's non-managed print services laser business and competition from global manufacturers, which may continue to be only partially offset by Lexmark's enterprise software segment growth, as well as our expectation that leverage may sustain above 2x.

We will monitor developments related to the proposed transaction, including required regulatory approvals and any announcements regarding the company's business strategy, capital structure and financial policy following the transaction. We expect to resolve this CreditWatch placement by the transaction close, which is expected to be in the second half of 2016.

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