Moody's ups UGS to SGL-2

Moody's Investors Service said it upgraded the speculative grade liquidity rating of UGS Corp. to SGL-2 from SGL-3, indicating good liquidity.

Near-term liquidity continues to benefit from $61 million of unrestricted cash on UGS' balance sheet as of June 30, the agency said, and the company has consistently generated sufficient cash from operations to cover capital expenditures and capitalized software expenses on an last-12-month basis since being purchased by a private equity consortium in 2004.

Moody's noted while revenue and EBITDA were up year over year for the six months ended June 30, cash flow from operations was $61 million, down from $80 million in the same period of the prior year. The decline in cash flow appears to be the combined result of a $6 million change in the amount of software development expenses capitalized, changes in foreign exchange rates, a decrease in payables and changes in deferred revenue, according to the agency.

However, cash flow from operations was more than sufficient to cover capital expenditures and capitalized software expenses for the period and sufficient to support the SGL-2 rating, Moody's said.

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