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Moody's gives IHS Markit CFR, notes Ba1
Moody's Investors Service said it assigned a Ba1 rating to $750 million of new senior notes of IHS Markit Ltd. that will be issued in exchange for IHS Inc.'s $750 million of senior notes.
The agency also assigned IHS Markit a Ba1 corporate family rating, Ba1-PD probability of default rating and an SGL-1 speculative grade liquidity rating.
The outlook is stable.
The action effectively assigns IHS Inc.'s existing ratings to IHS Markit, which will become the group holding company upon the completion of the planned merger of IHS Inc. with Markit Ltd., which will be renamed IHS Markit upon consummation of the merger.
Moody's will withdraw the rating on IHS Inc.'s senior notes if the entire principal amounts of the existing notes are tendered in the exchange.
The Ba1 corporate family rating reflects IHS Markit's enhanced scale, a high proportion of recurring revenues and the agency’s expectation that the combined company will maintain total debt to EBITDA below 4 times (Moody's adjusted) and generate free cash flow of about 20% of total adjusted debt.
The rating also incorporates the execution risk in integrating two companies of significant scale with disparate market focus.
While IHS Markit should generate strong free cash flow, Moody’s said it will essentially be committed to financing $1 billion of annual share repurchases in each of the next two years. IHS Markit's ability to maintain leverage in its target range of 2 times to 3 times (on company's reported basis) will be highly predicated on generating good organic revenue growth rates and timely attainment of cost synergies.
The Ba1 rating also reflects IHS Markit's highly acquisitive growth strategy and its moderately high leverage (about 3.5 times Moody's adjusted, pro forma for the merger and before including any revenue or cost synergies), according to the agency.
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