Moody's rates Perspecta debt Ba3

Moody's Investors Service said it assigned ratings on the debt of the issuer that will be named Perspecta, Inc.

The assigned ratings include a Ba3 corporate family rating and Ba3 on its first-lien debt.

The new company will be formed through the merger of DXC Technology Co., Vencore Holding Corp. and KGS Holding Corp.

The proceeds of the new debt will be used to pay separation payments and repay the existing debt of Vencore and KGS, Moody's said.

The ratings reflect a new company with greater than $4 billion of revenue and broad government service capabilities, including network modernization and numerous single award contracts, high backlog and strong EBITDA margin, potentially higher than 15%, the agency said.

A favorable U.S. defense budgetary setting with annual service outlays likely to grow 3% to 5% over the next two years also benefits the rating, Moody's said.

Perspecta will be a defense service contractor with substantial scale and qualifications to fulfill large managed service contracts and a variety of systems engineering and advanced analytic services in support of missions across federal and state agencies, the agency said.

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