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TMCNet:  Fitch: Dell's IT Services Business Sale Will Aid Debt Reduction

[March 29, 2016]

Fitch: Dell's IT Services Business Sale Will Aid Debt Reduction

Fitch Ratings believes Dell (News - Alert) Inc.'s (Dell) sale of its information technology services (Services) business to NTT Data Corp. for more than $3 billion will help reduce approximately $50 billion of debt incurred to finance Dell's $67 billion acquisition of EMC (News - Alert) Corp. (EMC) announced Oct. 13, 2015.

Fitch's 'BB' long-term Issuer Default Ratings (IDRs) for Dell and its direct wholly-owned subsidiary, Dell International LLC (Dell International), remain on Rating Watch Positive, pending the EMC acquisition's close, which is expected in the second half of calendar 2016.

The Positive Watch reflects Fitch's expectations that Dell's acquisition of EMC will result in the world's largest integrated information technology (IT) provider by revenues and will strengthen Dell's storage and virtualization offerings, providing higher profit margin growth opportunities. Fitch also expects the deal to strengthen Dell's free cash flow (FCF) profile, providing sufficient capacity to achieve targeted core leverage, which excludes debt and profitability associated with the Dell Financial Services, below 3 times (x) in the 12-18 months following the transaction's close. Fitch expects to resolve the Watch Positive upon receiving greater certainty around the ultimate capital structure following the deal and subsequent debt reduction roadmap.

Dell will fund the acquisition with mixture new common equity from owners, Michael S. Dell, MSD Partners, Silver Lake and Temasek, the tracking stock issuance, new debt financing and available cash, which will be bolstered by the Services sale. Dell and NTT (News - Alert) Data reached an agreement for NTT Data to buy Dell's IT Services business for more than $3 billion of cash. Dell acquired the IT Services business, formerly Perot Systems, in 2009 for nearly $4 billion. Neither party has noted the timing of the deal, which is subject to customary regulatory review.

Additional information is available on www.fitchratings.com

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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