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S&P cuts Dell notes; rates loans, notes
S&P said it affirmed its BB+ corporate credit rating on Dell Inc.
The outlook is stable.
At the same time, the agency assigned its BBB issue-level rating and 1 recovery rating to Dell's proposed $3.7 billion senior secured term loan A-1. The 1 recovery rating indicates an expectation for very high recovery (90%-100%) of principal in the event of a payment default.
S&P also assigned its BBB- issue-level rating and 2 recovery rating to the company's proposed $3.15 billion senior secured revolver, $3.925 billion term loan A-2, $3.5 billion term loan A-3, $8 billion term loan B and $16 billion senior secured notes. The 2 recovery rating indicates the expectation for substantial recovery (70%-90%; lower half of the range) of principal in the event of a payment default.
In addition, the agency assigned its BB issue-level rating and 5 recovery rating to the company's proposed $3.25 billion senior unsecured notes. The 5 recovery rating indicates an expectation for modest recovery (10%-30%; upper half of the range) of principal in the event of a payment default.
S&P also lowered its issue-level rating on Dell's $2.5 billion existing senior unsecured notes to BB- from BB+ and revised the recovery rating to 6 from 3. The rating was removed from CreditWatch, where it was placed with negative implications on Oct. 12, 2015. The 6 recovery rating indicates an expectation for negligible recovery (0%-10%) of principal in the event of a payment default.
Dell will use the proceeds from the debt issuance to partially fund its acquisition of EMC Corp., which is expected to close by October 2016.
"The stable outlook indicates our expectation that Dell will be able to successfully integrate its acquisition of EMC, maintain market leadership in its product categories, and achieved identified cost savings, leading to leverage declining to the low- to mid-3x area within 12-18 months after the transaction closes," S&P credit analyst David Tsui said in a news release.
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