S&P downgrades Cap Gemini

Standard & Poor’s said it lowered the long-term corporate credit rating on Cap Gemini SA to BBB from BBB+, along with the ratings on its senior unsecured debt to BBB from BBB+.

The outlook is stable.

The downgrades reflect the significant negative impact on Cap Gemini’s credit metrics from its announced acquisition of Igate Corp. because the transaction will be mainly debt funded, S&P said.

Pro forma the completed acquisition, Cap Gemini’s adjusted debt-to-EBITDA ratio is expected to be about 3x compared to 0.7x at year-end 2014, the agency said.

Consequently, S&P said it considers that the company’s financial risk profile has weakened, prompting a lower assessment to intermediate from minimal.

This deterioration more than offsets the acquisition’s modestly positive impact of about 1 percentage point on Cap Gemini’s operating margins and the strengthening of the company’s presence in the United States, the agency said.

These benefits will surface only gradually and be overshadowed by potentially significant integration and restructuring costs in 2015 to 2016, S&P said.

© 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.