S&P Lowers Outlook on Thomson Reuters (TRI) to Negative; Affirms Ratings
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Standard & Poor's Ratings Services revised its outlook on New York-based information solutions provider Thomson Reuters Corp. (NYSE: TRI) to negative from stable. At the same time, Standard & Poor's affirmed its ratings on the company, including its 'A-' long-term corporate credit rating.
"We base the outlook revision on our view of the weaker-than-expected operating performance in the company's Financial & Risk segment, which we expect will continue this year," said Standard & Poor's credit analyst Lori Harris.
The company is a major global integrated information solutions provider, operating under four segments: Financial & Risk (F&R), Legal, Tax & Accounting, and Intellectual Property & Science.
The financial industry has undergone a dramatic change in market dynamics given the downturn in the global financial markets in the last recession, with Standard & Poor's believing that financial institutions will continue to downsize. The effect at Thomson Reuters, through its F&R segment, was more modest during the recession owing to the company's high percent of recurring subscription revenues and business diversification, and the fact that the largest customer accounts for only about 1% of total consolidated revenue. However, the F&R business has yet to return to healthy organic revenue growth as we expected.
The negative outlook reflects Standard & Poor's view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions. A downgrade could result from further execution issues in the F&R segment; weak revenue and EBITDA growth trends for the company as a whole or specifically in F&R; or adjusted debt to EBITDA at or above 2.5x on a consistent basis. Alternatively, we could revise the outlook to stable if Thomson Reuters demonstrates sustainable improvement in F&R's operating performance, as well as its other business segments, while maintaining adjusted debt to EBITDA below 2.5x.
"We base the outlook revision on our view of the weaker-than-expected operating performance in the company's Financial & Risk segment, which we expect will continue this year," said Standard & Poor's credit analyst Lori Harris.
The company is a major global integrated information solutions provider, operating under four segments: Financial & Risk (F&R), Legal, Tax & Accounting, and Intellectual Property & Science.
The financial industry has undergone a dramatic change in market dynamics given the downturn in the global financial markets in the last recession, with Standard & Poor's believing that financial institutions will continue to downsize. The effect at Thomson Reuters, through its F&R segment, was more modest during the recession owing to the company's high percent of recurring subscription revenues and business diversification, and the fact that the largest customer accounts for only about 1% of total consolidated revenue. However, the F&R business has yet to return to healthy organic revenue growth as we expected.
The negative outlook reflects Standard & Poor's view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions. A downgrade could result from further execution issues in the F&R segment; weak revenue and EBITDA growth trends for the company as a whole or specifically in F&R; or adjusted debt to EBITDA at or above 2.5x on a consistent basis. Alternatively, we could revise the outlook to stable if Thomson Reuters demonstrates sustainable improvement in F&R's operating performance, as well as its other business segments, while maintaining adjusted debt to EBITDA below 2.5x.
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