Fitch: Dell's IT Services Business Sale Will Aid Debt Reduction

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings believes Dell Inc.'s (Dell) sale of its information technology services (Services) business to NTT Data Corp. for more than $3 billion will help reduce approximately $50 billion of debt incurred to finance Dell's $67 billion acquisition of EMC Corp. (EMC) announced Oct. 13, 2015.

Fitch's 'BB' long-term Issuer Default Ratings (IDRs) for Dell and its direct wholly-owned subsidiary, Dell International LLC (Dell International), remain on Rating Watch Positive, pending the EMC acquisition's close, which is expected in the second half of calendar 2016.

The Positive Watch reflects Fitch's expectations that Dell's acquisition of EMC will result in the world's largest integrated information technology (IT) provider by revenues and will strengthen Dell's storage and virtualization offerings, providing higher profit margin growth opportunities. Fitch also expects the deal to strengthen Dell's free cash flow (FCF) profile, providing sufficient capacity to achieve targeted core leverage, which excludes debt and profitability associated with the Dell Financial Services, below 3 times (x) in the 12-18 months following the transaction's close. Fitch expects to resolve the Watch Positive upon receiving greater certainty around the ultimate capital structure following the deal and subsequent debt reduction roadmap.

Dell will fund the acquisition with a mixture new common equity from owners, Michael S. Dell, MSD Partners, Silver Lake and Temasek, the tracking stock issuance, new debt financing and available cash, which will be bolstered by the Services sale. Dell and NTT Data reached an agreement for NTT Data to buy Dell's IT Services business for more than $3 billion of cash. Dell acquired the IT Services business, formerly Perot Systems, in 2009 for nearly $4 billion. Neither party has noted the timing of the deal, which is subject to customary regulatory review.

Additional information is available on www.fitchratings.com

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Source: Fitch Ratings

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