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Moody’s changes CDK view to negative
Moody's Investors Service said it affirmed CDK Global, Inc.'s Baa3 senior unsecured ratings and changed the outlook to negative following the company's announcement that it will accelerate its planned share repurchases over the next two years and will take on more debt to pay for the buy-backs.
The change in the outlook to negative reflects CDK's willingness to take on incremental credit risk to finance increased share repurchases while it is embarking on a comprehensive business transformation plan. Moody's views the action as a meaningful change in financial policy as the company is willing to take on additional debt to fund share repurchases, and will temporarily exceed its stated 2.5 times debt/EBITDA leverage target.
The company previously stated that it would only increase leverage to fund additional share repurchases or dividends after it has enhanced its financial flexibility through operational improvements.
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