April 29, 2024 08:34 GMT
Moody’s Affirms IBM at A3; Revises Outlook From Stable To Negative
TECHNOLOGY
New Profile: A3[N]/A-[S] (S&P affirmed last week)
- 2024 M&A spending seen at USD 8.7bn on the back of the announced USD 6.4bn Hashicorp acquisition which surpasses the expected USD 6bn FCF. Marks a shift from conservative financial strategies by funding M&A through debt.
- Move seen as extending the timeframe for Moody’s adj-debt to EBITDA to go <3x from 2.8x at FY23. Now seen improving towards 3x within two years of deal closure while adj-EBITDA margins are seen remaining in the mid-20% range.
- Upgrade possible if IBM maintains mid-single digit revenue growth, EBITDA margins above mid-20% range, and adj-debt to EBITDA in the low 2x range.
- Downgrade possible on expectation of adj-debt to EBITDA above the mid-3x range in 2025 with view that further deleveraging towards 3x by 2026 is unlikely. Also if cash declines meaningfully before mid-2x leverage is attained.
- EUR spreads muted and broadly in line with peers both today and since Q1 earnings and Hashicorp announcement.
Keep reading...Show less
157 words