S&P rates Yahoo convert BB+

Standard & Poor's assigned a BB+ rating to Yahoo! Inc.'s $750 million senior convertible notes due 2008 with a stable outlook.

The rating reflects its well-established Internet brand, high profit margins, good discretionary cash flow and ample cash cushion.

Concerns include revenue and earnings concentration from advertising and sponsorship, competition in the Internet search business and the challenge of retaining market position in an evolving Internet medium as Internet usage migrates to broadband.

For the 12 months ended March 31, the pro forma EBITDA margin was 25.2%, a significant improvement from 4.8% at the end of fiscal 2001, and pro forma debt to EBITDA was 2.9x.

Liquidity is strong, given current expectations of cash needs.

Yahoo has more than $2 billion in cash, cash equivalents and investments in marketable debt securities, and it generates discretionary cash flow well in excess of working capital and capital expenditure needs.

Capital expenditures average around 3.9% of sales and are expected to increase, reflecting additional investment in new products and research. However, these needs are unlikely to restrict discretionary cash flow generation. Debt maturities are minimal until 2008 when the convertible mature.

S&P cuts Baxter outlook

Standard & Poor's affirmed the A long-term ratings of Baxter International Inc., but revised the outlook to negative from stable.

Baxter's has made progress in meeting sizable financial obligations over the past year and S&P expects the company to shortly unwind its remaining equity forward purchase in a conservative manner.

However, the outlook reflects concerns that Baxter could have difficulty meeting expected cash flow levels in 2003 and beyond as it continues to grapple with changing fundamentals in certain core business lines and awaits the introduction of important new products.

Some of Baxter's available liquidity will be diverted to unwind approximately $575 million in remaining equity forward purchase contracts, which were established to hedge share repurchases that offset an extensive ESOP.

S&P believes that potential obligations can be adequately met by established reserves and longer term liquidity sources. But, at Dec. 31, Baxter also reported a large increase, to $1.2 billion, in the unfunded status of its post-retirement benefit obligations. Without a dramatic reversal of adverse market trends, it may have to dedicate a greater portion of its future cash flow to fund these obligations.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.