UPDATE: NASDAQ OMX Group (NDAQ) senior rating might be cut to junk by Moody's
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(Updated - April 1, 2013 5:16 PM EDT)
NASDAQ OMX Group, Inc. (NASDAQ: NDAQ) senior rating might be cut to junk by Moody's.
From Moody's:
Moody's Investors Service placed the ratings of NASDAQ OMX (senior at Baa3) on review for downgrade following the announcement that NASDAQ OMX will acquire the eSpeed trading platform from BGC Partners for $750 million in cash plus stock expected to be delivered over the next 15 years.
RATINGS RATIONALE
Moody's estimates that the eSpeed acquisition (together with NASDAQ OMX's earlier announced acquisition of Thomson Reuters' Corporate Services business) results in approximately $1.0 billion increase in NASDAQ OMX debt and a deterioration of its financial profile, including metrics such as Debt/EBITDA and EBITDA/Interest. Moody's views the financing of these transactions, which includes no equity raise at the outset, to be aggressive.
Moody's said that both acquisitions have a sound strategic rationale. The two acquisitions diversify the earnings and revenues of NASDAQ OMX and reduce its dependence on exchange-traded equities. Furthermore, the eSpeed acquisition gives NASDAQ OMX a strong platform in on-the-run US treasury trading, and builds on its core competencies of running and maintaining electronic order books. However, the acquisitions are also indicative of the pressures facing NASDAQ in its core trading and clearing business, where transaction revenues fell 13% in 2012 to $490 million .
During its review Moody's will examine the capacity of NASDAQ OMX to reduce leverage which is partly a function of the execution risks facing the firm as it integrates these two acquisitions at virtually the same time. Moody's will also consider whether any reduction in leverage will be enduring given NASDAQ OMX's shareholder distribution policies and potential for further acquisitions. NASDAQ OMX has repeatedly shown a willingness to increase leverage in pursuit of strategic transactions. Given the changing dynamics in its core business, NASDAQ OMX will likely continue to face such decisions in the future in an industry prone to consolidation.
NASDAQ OMX is a major exchange company that reported earnings of $352 million in 2012.
The principal methodology used in this rating was Global Securities Industry Methodology published in December 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
NASDAQ OMX Group, Inc. (NASDAQ: NDAQ) senior rating might be cut to junk by Moody's.
From Moody's:
Moody's Investors Service placed the ratings of NASDAQ OMX (senior at Baa3) on review for downgrade following the announcement that NASDAQ OMX will acquire the eSpeed trading platform from BGC Partners for $750 million in cash plus stock expected to be delivered over the next 15 years.
RATINGS RATIONALE
Moody's estimates that the eSpeed acquisition (together with NASDAQ OMX's earlier announced acquisition of Thomson Reuters' Corporate Services business) results in approximately $1.0 billion increase in NASDAQ OMX debt and a deterioration of its financial profile, including metrics such as Debt/EBITDA and EBITDA/Interest. Moody's views the financing of these transactions, which includes no equity raise at the outset, to be aggressive.
Moody's said that both acquisitions have a sound strategic rationale. The two acquisitions diversify the earnings and revenues of NASDAQ OMX and reduce its dependence on exchange-traded equities. Furthermore, the eSpeed acquisition gives NASDAQ OMX a strong platform in on-the-run US treasury trading, and builds on its core competencies of running and maintaining electronic order books. However, the acquisitions are also indicative of the pressures facing NASDAQ in its core trading and clearing business, where transaction revenues fell 13% in 2012 to $490 million .
During its review Moody's will examine the capacity of NASDAQ OMX to reduce leverage which is partly a function of the execution risks facing the firm as it integrates these two acquisitions at virtually the same time. Moody's will also consider whether any reduction in leverage will be enduring given NASDAQ OMX's shareholder distribution policies and potential for further acquisitions. NASDAQ OMX has repeatedly shown a willingness to increase leverage in pursuit of strategic transactions. Given the changing dynamics in its core business, NASDAQ OMX will likely continue to face such decisions in the future in an industry prone to consolidation.
NASDAQ OMX is a major exchange company that reported earnings of $352 million in 2012.
The principal methodology used in this rating was Global Securities Industry Methodology published in December 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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