Moody's: Rackspace unchanged

Moody's Investors Service said Rackspace Hosting, Inc.'s B1 corporate family rating is unchanged following its proposed issuance of a $100 million incremental senior secured term loan B.

The proceeds from the facility, along with cash on hand, will be used to fund the acquisition of TriCore Solutions, LLC, Moody's said.

The agency said it expects the transaction will be leverage neutral (after synergies) and will not materially impact Rackspace's credit profile, the agency said.

All of its other ratings, including the company's stable outlook, also are unchanged.

The acquisition of TriCore highlights Rackspace's strategic shift to focus on providing managed services, Moody's said.

Combining with Rackspace opens cross-sell opportunities within Rackspace's existing customer base, the agency said.

Moody's also said it expects Rackspace to extract cost synergies following the integration of TriCore.

Rackspace's ratings reflect its strong free cash flow profile, driven by stable recurring revenues, steady EBITDA margins and improving capital intensity, the agency said.

The company has a proven track record of organic revenue growth throughout the last five years, Moody's added.

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