S&P Places Rackspace (RAX) Ratings on CreditWatch Negative
- AT&T (T) to Acquire Time Warner (TWX) for $107.50/Share
- Rockwell Collins (COL) in Advanced Talks to Acquire B/E Aerospace (BEAV) - WSJ
- Top 10 News for 10/17 - 10/21: Merger Rumors Abound; CEOs Depart; Tesla Kicks Autopilot Up A Notch
- Wall Street ends little changed; Microsoft hits record
- AT&T (T) in Advanced Talks to Acquire Time Warner (TWX) - DJ
Find out which companies are about to raise their dividend well before the news hits the Street with StreetInsider.com's Dividend Insider Elite. Sign-up for a FREE trial here.
S&P Global Ratings said it placed its 'BB+' corporate credit rating on Rackspace Hosting Inc. (NYSE: RAX) on CreditWatch with negative implications.
At the same time, we placed our 'BB+' issue-level rating on the company's senior unsecured notes and senior unsecured revolving credit facility on CreditWatch with negative implications. If the existing debt remains part of the company's capital structure, we would lower the issue-level rating to reflect the lower expected corporate credit rating. In the event the existing debt is repaid, we would not lower the issue-level rating on this debt, and would withdraw the rating following the completion of the repayment. The '3' recovery rating on this debt is unchanged at this time and indicates our expectation for meaningful (50%-70%; upper half of the range) recovery in the event of a payment default.
"The CreditWatch listing reflects the likelihood of a multiple-notch downgrade of Rackspace following its agreement to be acquired by private-equity firm Apollo Global Management LLC," said S&P Global Ratings credit analyst Rose Askinazi.
While financing terms have not been disclosed, we expect the company to pursue additional debt financing that would push leverage above our current 3x downgrade threshold. Also, upon completion of the transaction, Rackspace will be controlled by a financial sponsor that may extract cash or otherwise increase leverage over time.
We intend to resolve the CreditWatch placement over the coming months as information becomes available about the company's proposed capital structure, financial policy, and strategic direction. We believe a two or three notch downgrade is likely given our expectation that the company's financial leverage will increase as a result of the proposed transaction. Given the shareholder and regulatory process, the deal is expected to close in the fourth quarter of 2016.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- France outlook raised to Stable from Negative at S&P
- CloudCheckr and Rackspace Announce $7.5 Million Dollar License Agreement
- Rodman & Renshaw Starts Abraxas Petroleum (AXAS) at Buy
Create E-mail Alert Related CategoriesCredit Ratings
Related EntitiesStandard & Poor's
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!