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S&P Raises VeriSign (VRSN) to 'BB+' Following Reassessment of Financial Profile

April 16, 2014 3:21 PM EDT
Standard & Poor's Ratings Services today said it raised its corporate credit rating on VeriSign Inc. (Nasdaq: VRSN) to 'BB+' from 'BB'. The outlook is stable. At the same time, we raised the rating on the company's senior unsecured notes to 'BB+' from 'BB'. The recovery rating of '3' on the notes remains unchanged, indicating our expectation of meaningful recovery (50% to 70%) for noteholders in the event of a payment default.

"The upgrade reflects our reassessment of the company's financial profile," said Standard & Poor's credit analyst Phil Schrank. "VeriSign has significant surplus cash, and we expect that its cash flow and leverage metrics will remain solidly within the range for its 'minimal' financial risk profile," he added, "with adequate headroom to make moderate acquisitions to expand its technology portfolio or client footprint."

Our assessment of the company's "fair" business risk is based on its relatively narrow business focus and limited diversity, partly offset by its good market position and significant base of recurring revenues. Other factors that contribute to our assessment of VeriSign's business risk profile are its "low" country risk and "intermediate" industry risk.

Our stable outlook reflects our expectation that the company will maintain its market position and good operating performance over the intermediate term.

A more aggressive financial policy, which would include debt-financed acquisitions or shareholder return initiatives that would cause leverage to be sustained in excess of 2x, could lead to a lower rating.

VeriSign's relatively narrow business focus limits the possibility of an upgrade to investment grade over the near term.


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