S&P rates Open Text notes BB

S&P said it assigned its BB issue-level rating to Open Text Corp.'s proposed $800 million of senior unsecured notes and wholly owned subsidiary Open Text Holdings Inc.'s proposed $800 million of senior unsecured notes. S&P assigned recovery ratings of 5 for both tranches, indicating the expectation for modest (10%-30%; rounded estimate: 20%) recovery in the event of a default.

Both the entities provide cross-guarantees and the proposed notes rank pari passu with the company's unsecured debt obligations. Proceeds will be used to repay borrowings under the $750 million revolver and to redeem an existing $800 million of senior unsecured notes due in January 2023. As a result, S&P said it views the proposed transaction to be leverage neutral.

“Our BB+ issuer credit rating and stable outlook on the company are unchanged. The transaction is also not likely to affect our BBB- issue-level rating, with a 1 recovery rating, on Open Text's senior secured debt, nor our BB issue-level rating, with a 5 recovery rating, on the company's $850 million senior unsecured debt due in June 2026,” S&P said in a press release.

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