TRI.PR.B on Credit Watch – Negative by S&P

Standard & Poor’s has announced:

  • •Toronto-based Thomson Reuters announced that it has signed a binding agreement to sell a 55% majority stake in its Financial & Risk (F&R) business, which accounts for more than half of its consolidated revenue and EBITDA, to Blackstone Group for about $17 billion.
  • •The company will use most of the net proceeds to fund stock repurchases totaling $9 billion to $11 billion and repay $3 billion in debt.
  • •We are placing our ratings on Thomson Reuters, including the ‘BBB+’ corporate credit rating, on CreditWatch negative.
  • •The CreditWatch placement reflects the possible loss of the diversification benefits we believe support Thomson Reuters’ creditworthiness and the ‘BBB+’ rating. At this stage, it isn’t clear whether the debt repayment and the more focused, smaller and stable remaining business will fully offset the sale.

We aim to resolve the negative CreditWatch placement within 90 days after we review the transaction and speak with Thomson Reuters’ management. We will reassess our rating and our view on Thomson Reuters’ business strategy, operating costs, and financial position and policy. We will also examine whether the benefits of a smaller, and more stable and focused company will offset the loss of the diversification benefits we previously considered supportive of Thomson Reuters’ creditworthiness.

If we believe the sale does not have a material impact on our view of the business risk and expect its pro forma adjusted leverage will remain comfortably below 3x over the next two to three years, we would likely affirm the ratings. Alternatively, if our analysis indicates a deterioration in the company’s creditworthiness or if we expect it will sustain leverage above 3x, we could lower the rating by up to two notches.

S&P currently rates the preferreds at P-2(low), in contrast with the recently confirmed DBRS rating of Pfd-3(high) assigned via downgrade in 2013.

TRI.PR.B is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

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