Fitch Affirms Oracle

Fitch Ratings said it affirmed Oracle Corp.'s issuer default and senior unsecured debt rating at A, and its short-term issuer default rating and commercial paper at F1.

The outlook is stable.

Fitch said the affirmation follows Oracle's bid to BEA Systems, Inc. for $19.375 per share, or $8.5 billion.

The affirmation considers that the acquisition is being funded with a mixture of current cash balances, commercial paper borrowing and long-term debt, the agency said, with more than half the deal being funded with debt in the near term.

Fitch said it expects that, as the company has shown before, over the near-term Oracle will generate significant free cash flow and refrain from share buybacks and instead reduce debt, in order to return to a net cash position.

Leverage could rise to about 1.2 times from 0.7 times, the agency said.

Ratings reflect strong and consistent annual free cash flow, strengthened competitive position, minimal operating or customer issues resulting from acquisitions and the size and diversity of Oracle's installed base, as well as the barriers to entry, the agency said.

Concerns center on expectations that Oracle will continue to use annual free cash flow to fund acquisitions and share repurchases, Fitch said.

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