Moody’s: BioMed Realty on downgrade review

Moody's Investors Service said it placed the Baa2 issuer rating of BioMed Realty Trust, Inc. and the Baa2 senior unsecured rating of BioMed Realty LP under review for downgrade.

This action follows news that BioMed is being acquired by Blackstone Real Estate Partners VIII in a transaction valued at about $8 billion, Moody’s said.

The acquisition is expected to close in the first quarter of 2016, the agency added.

The merger agreement states that the unsecured notes totaling $1.3 billion will be redeemed. But the precise capital structure of the company subsequent to this transaction is not yet clear, Moody’s said.

Due to the acquisition by Blackstone, the agency said it believes that the likelihood of additional leverage, particularly secured leverage, as well as the deterioration of other credit metrics is high.

S&P lowers Volkswagen

Standard & Poor’s said it lowered the long-term corporate credit rating of Volkswagen AG to A- from A, along with its short-term rating to A-2 from A-1.

The agency also said it lowered the long- and short-term ratings on the company’s debt instruments.

The long-term ratings on Volkswagen Financial Services AG and its subsidiary Volkswagen Bank GmbH also were lowered to A- from A and its short-term rating was lowered to A-2 from A-1.

The agency also lowered to A- from A the long-term issuer credit and financial strength ratings on captive insurer Volkswagen Insurance Co. Ltd.

The ratings also remain on CreditWatch with negative implications, where they were placed in September.

All of the short-term ratings were removed from CreditWatch negative, with the exception of Volkswagen Canada Inc.’s and VW Credit Canada Inc.’s Canada national scale short-term ratings of A-1 (low), which remain on negative watch.

The downgrades reflect a view that the company continues to face wide-ranging negative credit consequences following its admission that it installed software designed to manipulate diesel engine exhaust emissions in 11 million passenger cars and commercial vehicles, S&P said, and the related global recall of these vehicles.

The downgrades also consider that the company has demonstrated material deficiencies in its management and governance and general risk management framework, the agency said.

Its internal controls have been shown to be inadequate in preventing or identifying alleged illegal behavior in the United States and misconduct in other regions, S&P said.

S&P puts Dell, EMC on watch

Standard & Poor’s said it affirmed the BB+ corporate credit rating on Dell Inc.

The agency also said it placed the BBB rating on the senior secured credit facilities of Dell International LLC, a wholly-owned subsidiary of Dell, on CreditWatch with negative implications.

S&P also said it placed the BB+ rating on Dell’s senior unsecured notes on CreditWatch with negative implications.

The outlook is stable.

Details of the financing terms, including the amount of total debt issuance, the amount of secured debt compared to unsecured debt and the amount to be issued at each borrowing entity have not been disclosed, S&P said.

The agency also said it placed the A corporate credit rating on EMC Corp. on CreditWatch with negative implications, along with the A rating on EMC’s senior unsecured notes and A-1 short-term rating on its commercial-paper program.

Dell’s affirmed ratings reflect the company’s improved business risk profile as the acquisition of EMC strengthens Dell’s existing product portfolio to include market leadership positions in PC, servers, storage and virtualization software, S&P said.

The acquisition also enhances Dell’s position as a critical IT business partner with its customers and supply chain partners, improves its profitability profile as a result of better product mix and enables the opportunities for revenue and cost synergies, the agency said.

Offsetting these factors is a view that the transaction will weaken the company’s financial risk profile due to higher debt leverage, S&P said.

Although the transaction should yield cost synergies, the combination of Dell’s and EMC’s sales forces could present integration challenges, the agency said.

Moody’s puts Dell on upgrade review

Moody’s Investors Service said it placed all of the ratings of Dell Inc. and Dell International under review for upgrade, including its corporate family rating of Ba2.

The upgrade review follows new that Dell signed a definitive agreement to acquire EMC Corp. for $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware, Inc. for a total transaction value of about $67 billion, Moody’s said.

Dell plans to finance the cash portion of the transaction price through a combination of new common equity, new debt financing and cash on hand, the agency said.

The transaction is subject to customary conditions, including receipt of required regulatory and EMC stockholder approvals, Moody’s said.

The review will conclude upon the close of the transaction, which is expected to between May and October 2016.

The review reflects a view that despite the significant increase in debt and initial leverage, Dell’s overall credit profile will be enhanced with the acquisition of EMC, the agency said.

The merger will create the largest private technology company in the world based on revenues, Moody’s said, with a leading global market position in personal computers and data storage.

Moody’s puts EMC on downgrade review

Moody’s Investors Service said it placed EMC Corp.’s A1 senior unsecured rating under review for downgrade following news that it will be acquired by Dell Inc. for $24.05 per share in cash in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware, Inc. for a total transaction value of about $67 billion.

Moody’s said it expects to conclude the review upon the close of the transaction, which is expected between May and October 2016.

Dell plans to finance the cash portion of the transaction price through a combination of new common equity, new debt financing and cash on hand, the agency said.

The ratings under review include EMC’s senior unsecured rating of A1, senior unsecured shelf registration rating of provisional A1 and prime-1 short-term rating for commercial-paper.

The review, which could conclude in a multi-notch downgrade to speculative grade, will focus on the deal structure and potential subordination of EMC bonds to newly raised acquisition debt, Moody’s said.

The agency said it believes that the combined company will allocate a majority of its cash flow to debt repayment and adjusted debt-to-EBITDA is expected to decrease to less than 4x by the end of calendar year 2017.

Moody’s puts UBS on upgrade review

Moody’s Investors Service said it placed on review for upgrade the long-term ratings of UBS AG and affiliates, including the bank’s long-term deposit rating of A1, senior unsecured debt rating of A2, standalone baseline credit assessment of Baa2 and counterparty risk assessment of A1(cr).

The agency also placed on upgrade review the Baa3 rating on the senior unsecured debt of UBS Group Funding (Jersey) Ltd., guaranteed by the bank’s parent holding company, UBS Group AG.

The review was triggered by continued improvements in the bank’s leverage ratio, as well as recent improvements to the bank’s profitability, Moody’s said.

While the group’s risk-based capital ratios have been the strongest among its peers for some time, the bank’s leverage ratio has until recently been a relative weakness for the bank, the agency said.

But, increased retained earnings and the recent issuance of high-trigger contingent capital, together with reductions in the bank’s balance sheet and leverage exposure, have boosted the bank’s leverage ratio to a level more consistent with peers, Moody’s said.

The agency also said it believes the bank’s higher leverage ratios are likely to be sustained.

During its review, Moody’s said it will focus on the trajectory of the bank’s profitability improvements and the sustainability of those improvements, including the risk of additional litigation charges and the potential for further restructuring charges and costs related to compliance with regulatory initiatives.

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