Moody’s might drop Computer Sciences

Moody's Investors Service said it placed the Baa2 senior unsecured ratings of Computer Sciences Corp. under review for downgrade following the announcement of its plan to divide into two separate, publicly traded companies, in a transaction which will effect a spinoff of its North American Public Sector business.

The review reflects Moody's view that Computer Sciences’ planned spinoff will result in a smaller business with less business diversity and profitability than the current combined business.

The company has indicated that at the closing of the spinoff, leverage for standalone Computer Sciences will be about 1 time (0.5 times on a net debt to EBITDA basis) and for North American Public Sector will be about 2.5 times (2 times on a net debt basis). However, specific capitalization plans, including the allocation of cash balances, for standalone Computer Sciences and North American Public Sector have not been announced.

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