(The following statement was released by the rating agency) Overview
-- U.S. financial services industry software provider SS&C Technologies announced yesterday that it is acquiring the assets of Thomson Reuter's PORTIA business for $170 million in a debt-financed transaction.
-- Pro forma for the PORTIA transaction alone, SS&C's adjusted leverage would only approach the 2x area, which is comfortably within the current rating parameters.
-- Additionally, SS&C continues to explore a potential cash-based acquisition of U.K.-based GlobeOp, whose purchase price could exceed $800 million and, if financed mostly with debt, could initially push leverage further, to above 5x.
-- We are placing our 'BB' corporate credit rating on SS&C on CreditWatch with negative implications. Rating Action On March 1, 2012, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating on Windsor, Conn.-based SS&C Technologies Inc. on CreditWatch with negative implications. Rationale The CreditWatch listing follows SS&C's Feb. 29, 2012 announcement that it will acquire the assets of Thomson Reuter's PORTIA business for $170 million in cash. SS&C will issue a $175 million term loan to finance the acquisition. Pro forma for the acquisition, we believe SS&C's adjusted leverage will increase from 0.9x to about 2.0x based on December 2011 results, excluding any additional EBITDA contribution from PORTIA, since it was not disclosed. This transaction by itself does not alter our view of the current rating, which incorporates incremental debt capacity for leverage of up to about 3x EBITDA on a sustained basis. Additionally, although SS&C has historically been acquisitive, it has demonstrated successful integration of its acquisitions, while maintaining consistent profitability. At the same time, according to SS&C's Feb. 15, 2012 press release, it continues to conduct due diligence and is in active discussions with banks regarding a cash offer for U.K.-based GlobeOp Financial Service. GlobeOp, a financial technology provider to the hedge fund industry, agreed to be acquired by TPG Capital LLC. for approximately $800 million in early February. We believe that this acquisition, if completed, could strengthen SS&C's business risk profile through potential market share gains and operational synergies, given its similar product and end-market focus. However, we estimate that if SS&C finances the GlobeOp acquisition with mostly debt, initial adjusted leverage could rise above 5x and lead us to revise our "significant" financial risk profile (as defined in our criteria). CreditWatch We will monitor developments related to the possible GlobeOp acquisition and resolve the CreditWatch listing when more information regarding a potential transaction and financing becomes available. If an all debt-financed acquisition of GlobeOp were to occur, we could lower the rating to the 'B' category. If SS&C does not complete the acquisition, we will review its growth plans and financial policy before resolving the CreditWatch. Related Criteria And Research
-- U.S. Technology Companies' Liquidity Is Higher, For Now, Jan. 18, 2012
-- Industry Economic Outlook: Slow Global IT Spending Growth Is Likely To Continue Into 2012, Jan. 12, 2012
-- Issuer Ranking: Global Technology Ratings, Strongest To Weakest, Dec. 22, 2011
-- Reshuffling The Debt: Global High-Tech M&A Activity Accelerates, Oct. 13, 2011
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Key Credit Factors: Methodology And Assumptions On Risks In The Global High Technology Industry, Oct. 15, 2009
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List CreditWatch Action
To From SS&C Technologies Inc. Corporate Credit Rating BB/Watch Neg/-- BB/Stable/-- Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. (New York Ratings Team)