Moody's might downgrade eBay

Moody's Investors Service said it placed eBay, Inc.’s A2 senior debt rating under review for downgrade following the company's announcement of its plan to divide into two separate, publicly traded companies in a transaction that will effect a spinoff of its PayPal subsidiary.

The review reflects Moody's view that eBay's planned spinoff plan will result in a smaller company with a weaker credit profile than the current combined business. The existing debt will remain with the eBay marketplace business. Moody's also noted that the separation follows intense shareholder pressure on the company in early 2014.

“Although the proposed separation of the marketplaces and payments businesses should not present any major operational challenges, there is significant business overlap between the two units, and the terms of the new arms-length contractual arrangements between the entities following the separation will be critical to our review,” Stephen Sohn, senior credit officer, said in an agency news release.

The review could lead to a multi-notch downgrade but will likely result in eBay retaining investment-grade status, the agency said.

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