S&P downgrades IBM

S&P said it lowered the issuer credit and issue-level ratings on International Business Machines Corp. to A from A+. The outlook is negative.

S&P also lowered the issuer credit and issue-level ratings on IBM Credit LLC to A from A+.

The agency affirmed its short-term rating on IBM and IBM Credit LLC's commercial paper at A-1, with no change to its assessment of the IBM's strong liquidity profile.

“The rating downgrade reflects prospective changes in IBM's debt leverage, which we expect to rise to about 2.4x at transaction close, up from about 1x as of Sept. 30, 2018. IBM will issue substantial debt to fund the acquisition of Red Hat,” S&P said in a news release.

“However, we believe the company's debt leverage will decline gradually to about 2x by 2021 as IBM suspends share repurchases in the two years after the transaction closes and pursues a balanced debt repayment using its discretionary cash flow, and pursuing other, smaller acquisitions, which could help IBM's business and financial risk profiles.”

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